Stamp duty reform would unlock housing market and drive economic growth
Peter Graham, National Tax Lead for Real Estate and Construction at RSM UK, comments: “We know that stamp duty land tax (SDLT) is one of the biggest barriers in the housing market. This was confirmed at a recent real estate webinar where 64% of property experts agreed that reducing or reforming stamp taxes on property in the forthcoming budget would have the most positive impact on the property market. The residential market continues to be shaped by affordability constraints and a chronic lack of supply, therefore removing SDLT would help in both areas.
“The high levels of SDLT prevent people moving as they don’t want to incur the cost, but this just locks up the chain, and liquidity in the market. Reducing or removing the SDLT burden would not only stimulate the housing market with more transactions, but it would make housing development more viable increasing production; allow talent to move more freely boosting business and allow people to downsize from larger homes. This would ultimately be a stimulus for the wider UK economy. Although, many people believe that abolishing SDLT would inflate house prices.
“SDLT (which applies in England and Northern Ireland) and its equivalent in Wales and Scotland currently bring in around £15bn per year, with the vast majority of receipts relating to residential property transactions. The Office for Budget Responsibility (OBR) forecasts that that revenue is set to rise to over £26bn in total per year by 2030. Although the cost of the policy according to the Tories is expected to be £9bn as it only applies to UK purchasers of primary residence.
“This would still leave a fiscal gap. However, even reforming SDLT to a lower level where buyers and sellers pay say 1% each on transactions or having a higher-level council tax band for the most expensive properties would still boost transactions and go some way to offset the missing revenues.”