Stamp duty killing house sales

The Daily Telegraph - - Front page - By Christo­pher Hope, Is­abelle Fraser and Laura Hughes

STAMP duty must be re­formed be­cause it is ex­ac­er­bat­ing the hous­ing cri­sis by stop­ping older home own­ers from down­siz­ing, a Cab­i­net min­is­ter warned last night.

The in­ter­ven­tion by a se­nior Tory, who wished to re­main anony­mous, came af­ter a re­port from aca­demics said that stamp duty re­duces the rate of house moves by nearly a third and means that large homes were not be­ing freed up for young, grow­ing fam­i­lies.

Min­is­ters, peers and think tanks are now urg­ing Philip Hammond, the Chan­cel­lor, to cut the duty – dubbed a “tax on mov­ing” – in his Au­tumn Bud­get, amid fears that it is sti­fling the hous­ing mar­ket. The Daily Tele­graph has cam­paigned for the tax to be re­viewed.

The Cab­i­net source said the sit­u­a­tion was now so acute it had “a big im­pli­ca­tion in terms of eco­nomic growth”.

A lack of hous­ing for younger Bri­tons is one of the most se­ri­ous po­lit­i­cal prob­lems fac­ing the Con­ser­va­tives and many se­nior Tory fig­ures be­lieve Theresa May, the Prime Min­is­ter, must ad­dress the is­sue if she is to match Labour’s pop­u­lar­ity among vot­ers aged un­der 40.

It was pre­vi­ously as­sumed that build­ing more homes was the only an­swer, but it has now emerged that for­mer chan­cel­lor Ge­orge Os­borne’s de­ci­sion to sharply raise stamp duty had a ma­jor ef­fect on hous­ing sup­ply.

Mil­lions of pen­sion­ers in large homes are un­will­ing to move to smaller prop­er­ties be­cause of stamp duty lev­els – such as £143,000 on a £2mil­lion home or £20,000 on a £600,000 prop­erty.

The new re­port, from the Lon­don School of Eco­nom­ics (LSE) and the VATT In­sti­tute for Eco­nomic Re­search, found that the rate of home mov­ing would rise by 27 per cent if stamp duty was abol­ished en­tirely.

Prof Chris­tian Hil­ber of the LSE, who co-au­thored the re­port, said: “The key mes­sage of our pa­per is that stamp duty ham­pers mo­bil­ity sig­nif­i­cantly.

“If you are a young fam­ily and you have an ad­di­tional child, you’ll need an ad­di­tional room, but the stamp duty is dis­cour­ag­ing this kind of move be­cause of the ad­di­tional cost and lack of avail­able homes to move into.

“In a nut­shell, the stamp duty dis­cour­ages the el­derly from down­siz­ing and young ex­pand­ing fam­i­lies from mov­ing to more ad­e­quate larger hous­ing.”

Un­der the 2014 re­forms a long­stand­ing “slab” sys­tem – with buyers charged a per­cent­age of the full pur­chase price as soon as it hits cer­tain thresh­olds – was scrapped and re­placed by a “slice” ap­proach, with dif­fer­ent per­cent­age rates ap­plied to each por­tion of the price.

There is no levy on the first £125,000, then two per cent up to £250,000, five per cent up to £925,000, 10 per cent to £1.5mil­lion, and 12 per cent on trans­ac­tions above that.

Re­search has shown that home sales are 11 per cent lower than they were be­fore Mr Os­borne re­formed stamp duty

while an anal­y­sis by Ox­ford Eco­nom­ics also found changes to the stamp duty sys­tem led to 1,950 fewer sales of prop­er­ties worth more than £1m in 2015.

The Cab­i­net source told The Daily Tele­graph it was time Mr Hammond “dealt” with the tax, say­ing: “It is a big trans­ac­tion tax and that has a big im­pli­ca­tion in terms of eco­nomic growth – it is stop­ping peo­ple mov­ing.”

The min­is­ter said it might be bet­ter to ad­dress stamp duty af­ter Brexit in March 2019, pend­ing a re­view into how it im­pacts on the hous­ing mar­ket.

Lord Law­son of Blaby, a for­mer chan­cel­lor, said: “The present lev­els of stamp duty are clearly coun­ter­pro­duc­tive, in terms of hous­ing pol­icy and rev­enue alike.”

Mark Lit­tle­wood, of the Thatcherit­e think tank the In­sti­tute for Eco­nomic Af­fairs, said: “The Gov­ern­ment is ac­tively en­cour­ag­ing peo­ple, es­pe­cially the el­derly, to re­main in large prop­er­ties when they would pre­fer to down­size and re­lease a fam­ily sized home on to the mar­ket.”

Rob Per­rins, chief ex­ec­u­tive of Berke­ley Group, one of Bri­tain’s big­gest house builders, said: “We be­lieve stamp duty should be halved across the board, and free for those over 60.”

Saga, the con­sumer group for the el­derly, said its re­search shows up to 1.1mil­lion over 65s with one spare bed­room and a fur­ther 2.3mil­lion with two or more spare rooms, with many feel­ing pre­vented from down­siz­ing by the stamp duty sys­tem.

An HM Trea­sury spokesper­son said: “We re­formed prop­erty taxes in­clud­ing stamp duty to help more peo­ple get onto the prop­erty lad­der.

“In ad­di­tion, we are help­ing peo­ple – in­clud­ing young fam­i­lies – to buy their first homes through poli­cies such as Help to Buy and the Life­time ISA, and the re­cent £2.3bn Hous­ing In­fra­struc­ture Fund which will free up over 100,000 prop­er­ties in high de­mand ar­eas.”

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