The Chancellor, Philip Hammond, announced in his 2017 Autumn budget that Stamp Duty would not be payable for first time buyers buying up to £300,000. He also announced that first time buyers buying up to £500,000 would only be charged stamp duty on the balance above £300,000.
He also pledged to build 300,000 homes by the mid 2020s. But these policies don’t go far enough and won’t solve the short-term problem.
The stamp duty holiday for first time buyers has seen an increase in enquiries from first time buyers across the country per Graham Norwood on Estate Agent Today.
If this increase in enquiries leads to an increase in transactions then one part of the market will be squeezed. Stamp duty at £1million is £43,750 and as a second home purchase is £73,750. Such large costs of moving are preventing people from doing so. More and more people in the middle to top end of the market are staying put and extending their house or making do with what they have.
The government should abolish stamp duty in full. This indirect tax prevents the housing market from working properly and has damaged it so much that people no longer move when they would like to.
By abolishing stamp duty the market would be allowed to find its natural equilibrium. People would be able to move when they want to and the number of transactions would increase. There would be more chance for people to move up the market and therefore it would be easier for first-time buyers to get into the market.
Obviously, this would give a massive decrease in tax revenue for the government which should be replaced by a property tax. Such a property tax would be dependant on the value of the property and payable by the property owner. It takes away the need for a stamp duty surcharge for second homes and would mean that those who own more properties pay more taxes.
To summarise, the inability of UK citizens to buy their own home is exacerbated by stamp duty land tax. The first-time buyer holiday which was announced last year has helped, but it doesn’t go far enough.
In order to help the liquidity of the UK housing market, stamp duty should be abolished and replaced by a national property tax. This will help first-time buyers get into the market and help the housing market work better.
If you would like advice on how to buy your next home contact us at email@example.com . Alternatively, you can read our article on when to start your search for a new home.