09 February 2024
The latest statistics published by the Office for National Statistics suggest that the UK housing market has stagnated. House prices decreased by 1.2% in the year to 31 October 2023 and the number of UK residential transactions that completed in December 2023 were 20% lower than those in December 2022, indicating there is hesitancy in the housing market.
As one of the key pillars of the UK economy, the performance of the housing market has a huge impact on consumer confidence. Economic uncertainty combined with spiralling mortgage costs puts increased pressure on UK homeowners, leaving households with less disposable income and more cautious with their spending.
December 2023 brought good news for some with some fixed rate mortgage deals being quoted at rates below 4% for the first time in over six months. However, whilst the recent rate reductions on some mortgage deals may start to restore confidence, millions of people are still facing significant increases in their living costs, as more than 2.5m fixed rate mortgages were due for renewal between 2022 and 2023.
With this in mind, what tax policies could the government have up its sleeve to try and stabilise the housing market? One tool that can be used to influence demand for housing in England and Northern Ireland is to make changes to stamp duty land tax (SDLT).
Since SDLT replaced stamp duty on land transfers in 2003, SDLT policies have been changed numerous times. In periods where the economy has been struggling (for example, following the financial crisis in 2008), new or increased reliefs have been introduced to stimulate demand. Such reliefs have often been temporary and/or have been reversed when the government was subsequently trying to raise additional tax revenues. It is however evident that, regardless of their differing political views, all governing parties have been open to tinkering with SDLT to try keep the housing market buoyant and support the wider economy.
The recent Autumn Statement was quiet when it came to SDLT reliefs. However, with more data being published implying that the UK housing market has slowed, we would not be surprised if the government announces enhancements to the existing SDLT reliefs in the upcoming Spring Budget.
This could be via extensions to the thresholds at which the various rates of SDLT are paid, reductions in one or more of the marginal rates of SDLT, or through a temporary SDLT holiday, depending on how aggressive the government feels it needs to be. This approach, alongside a revised help-to-buy scheme, may be a popular move with the general public, but it is also a tried and tested method already used by previous governments to successfully influence the UK housing market.
Any of the above measures would be well received based on a poll conducted in RSM’s real estate and economy webinar, where 44% thought that a cut to SDLT would have the most impact to the real estate sector, compared to other tax cuts.
It is important to note that with a general election imminent, any changes could be short-lived if a new government is elected. Although, whilst different governments will often implement different policies, SDLT reliefs will remain a key tool used by all governing parties to encourage investment into the housing market and wider economy.