Stamp Duty Change – or is it just hype?
Boris Johnson, has pledged to abolish the property tax on homes under £500,000 and reverse the rise on prime and super prime homes that was introduced in 2014 by the then Chancellor George Osborne if he becomes the new Conservative leader and Prime Minister.
This move to cut stamp duty on homes below £500,000 would clearly benefit the first time buyer market while lowering the top rate from 12% to 7%.
However a reversal in stamp duty tax thresholds at the “top-end” could also help boost buyer demand and increase high end house prices.
Plus If the 3% surcharge for landlords and additional home buyers was dropped as well, it would substantially revive the property market.
One of the major problems with these changes, and indeed, with high stamp duty in general, is that it massively hampers household mobility. The higher the rate, the more people the government prevents from moving house due to its cost. Buying and selling activity declines, the market goes into a semi-state of gridlock.
Current stamp duty rates have particularly strangled the top end of the market. Especially in London, where the average house price is disproportionately high, those looking to buy and sell are discouraged from doing so.
It’s clear, whether you look back on sales volumes, or whether you look at tax receipts, that the increase in stamp duty originally imposed by George Osborne hasn’t proved effective. The market simply hasn’t been able stomach the rises and the outlook doesn’t seem to be improving. Sales volumes continue to gradually decline, as does tax revenue.
So slashing the top and bottom rates seems will relieve the burden (for some), and yes it’s a positive step, but will it “kickstart” the market ?