UK Housing Market
OECD Urges UK to Scrap Stamp Duty in Bid to Revive Housing Market
UK debt set to reach 270% of GDP in 50 years with Stamp Duty abolition proposed to boost property market
David Hannah – Group Chairman of Cornerstone Group – discusses why reforming Stamp Duty will boost the UK's housing market and benefit first-time buyers.
The latest research from The Organisation for Economic Co-operation and Development (OECD) urges the UK government to abolish Stamp Duty Land Tax, stating it hampers mobility, slows the housing market, and ties up capital. Representing 38 countries, the OECD notes that the UK's debt is nearing 100% of GDP, stressing the need for financial stabilisation. Testament to this, The Office for Budget Responsibility warns that UK debt could reach 270% of GDP in 50 years due to rising state spending, and measures such as abolishing Stamp Duty Land Tax have been deemed an effective way to help boost the property market, whilst reducing Brit's debt. However, Stamp Duty raised £15.4bn for the UK government in the 2022/23 financial year, with David Hannah, Group Chairman of Cornerstone Tax, highlighting that by maintaining current Stamp Duty thresholds instead of abolishing the tax, would better boost the housing market and benefit first-time buyers.
OECD
With Cornerstone Tax’s research having found that 44% of first-time buyers say that they cannot live in their desired location because of increased house prices in the community, supporting first-time buyers should be a priority for the government through its Autumn Budget. Despite stamp duty generating around £13 billion annually, a temporary cut in 2022 caused receipts to surge to £17.5 billion. David Hannah suggests that keeping the existing stamp duty thresholds would further stimulate the property market, and by extension, the national economy.
Homes valued at £250,000 or less are exempt from stamp duty, while those valued between £250,000 and £925,000 face a 5% levy. These thresholds are overdue for a review, with the average UK home now priced at £292,505. Furthermore, Hannah argues that adjusting these bands would not only boost sales for first-time buyers, but also benefit pensioners looking to move up the property ladder. By increasing demand for mid-to-high-end properties, this would create a ripple effect enabling current homeowners to sell their lower-end properties, and invigorating Britain’s stagnant housing market.
David Hannah, Group Chairman of Cornerstone Tax, comments on stamp duty thresholds:
“The decision from the government to lower stamp duty bands shows a concerning deficit of joined-up thinking. Does this Chancellor and Prime Minister not understand that if they want 1.5 million new homes, they cannot drive landlords out of the market, incur additional charges for first-time buyers and freeze up working capital for developers – which can only be available if these homes are selling.
“These former two measures have further deterred market entrants and if I were a builder, I’d be freezing development until there’s a ready market. Looking at this combination of measures alongside the current structural issues plaguing the property market, it makes previous governments look like Nobel Prize laureates.
The government's proposed changes act as a reminder of the Development Land Tax, a measure from the 1970s levied on landowners who created value on unused land. At its height, developers were paying 80% on gains and it decimated construction in this country. The lesson learnt is straightforward. You can't incentivise development and growth through penalisation and taxation."
”Moreover, I expect stamp duty receipts to fall significantly, then to flatline in Q1 2025, potentially plunging the British property market into a desperate situation. In essence, reducing stamp duty thresholds means that it will ultimately be the consumers who foot the bill."
David Hannah, Group Chairman
