Trading places

The housing market is freezing, partly as a result of uncertainties over Brexit but also because of the property tax regime. People are reluctant to move when they have to hand over such a large sum of money to the Treasury in the form of stamp duty in order to do so. This is especially pronounced among older homeowners who wish to downsize, but object to paying many thousands of pounds in tax for the privilege. As a result, bigger houses that would suit young families are not coming on to the market.

In a report today, the Policy Exchange think tank proposes a remedy in the form of an exemption from stamp duty for older couples seeking to move to smaller properties. It calculates that there are more than one million properties with two or more spare bedrooms lived in by at least one person aged 65 or over in England. That represents one fifth of all “under-occupied” homes and is a phenomenon seen largely in rural areas such as Somerset and Dorset. Rates of under-occupancy by older households are lowest in central London, where equity gains have been highest.

The Policy Exchange recommends scrapping the 2 per cent stamp duty band levied on those buying homes between £125,000 and £250,000 for older homeowners looking to move home. Far from losing money, this would generate extra tax revenue by increasing activity. But this is, if anything, too cautious and exemptions should be available for the over-65s at higher levels of purchase price as well. The report suggests a Government initiative to build retirement homes; but if the tax regime were properly reformed, the market would provide. We need to see some imagination here.