LAUREN DAVIDSON PERSONAL ACCOUNT

A stamp duty cut just for pensioners will not be enough to reboot the housing market

Would a stamp duty reduction be enough to encourage you to downsize? A thought-provoking report published this week by Cass Business School and the Centre for the Study of Financial Innovation, a think-tank, called for a “last-time buyer” exemption from stamp duty.

It would work in a similar way to the first-time buyer relief, meaning downsizers wouldn’t pay tax on the first £300,000 of property value.

This would help to free up some of the 15 million “surplus” rooms in Britain, languishing unused in large family homes lived in by older people, the report said.

This isn’t the first time the idea has popped up and it certainly has merit – perhaps even more so in the current climate. House prices fell by 1.7pc in May, according to data published by Nationwide this week – the largest monthly decline in 11 years.

A fall in house prices makes it not a good time to sell a large, expensive home in favour of a smaller one. A 2pc fall in prices would knock £4,000 off a £200,000 flat but five times that off the sale price of your £1m house. And the markdown is likely to be larger at the higher end of the market; estate agents report negotiated discounts of 5pc-10pc.

The study points out that a key problem in encouraging older people to downsize is a severe lack of appropriate homes for them to buy. Just 2.5pc of Britain’s 29 million dwellings are defined as retirement housing, with only 7,000 homes built a year. A flat suitable for a first-time buyer who is at work all day and out every evening is not suitable for a pensioner with time on their hands who needs more space at home. Why sell a beautiful, memory-filled house for something less comfortable and not fit for purpose?

What the report fails to mention, however, is that no incentive will be large enough if downsizers can’t find someone to buy their home.

This will also be true now more than ever, with one in four working adults placed on furlough and earning 80pc of their normal salary, capped at £2,500 a month. Many of those people are at risk of job losses when the state support schemes end – and none of them is getting a mortgage to buy a large family home.

A stamp duty cut may be just the thing to get the market moving again, but restricting it to last-time buyers won’t do enough. There’s no point making it easier for one group – not least the wealthiest one that has enjoyed massive house price growth – when the market depends on everyone moving through the same system. The growing family upsizing into the pensioner’s home will have to foot a far more prohibitive stamp duty bill than the downsizer.

Research has shown that a one percentage point cut in stamp duty could boost sales by 20pc, resulting in hundreds of millions of pounds in extra tax revenue working its way into the Treasury’s depleted coffers. Wouldn’t that be a win-win?

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