Gary Bailey, Hope Capital

The chancellor's stamp duty holiday is welcome, but a thorough review of property tax is needed




There has understandably been great excitement in the property industry generally about the chancellor's announcement of a nine-month stamp duty 'holiday' in his recent mini-Budget.

There is some evidence already that this has prompted a steady flow of potential new buyers entering the market – including people buying second homes and buy-to-let landlords.  These buyers, while still needing to pay the additional 3% stamp duty, will save a huge £15,000 on a £500,000 property – certainly not an amount to be sneezed at.

When people move home, it is not just a house or flat they are acquiring; they will also want and need to spend money on furniture, decorations, fixing any issues left behind by the previous owners, and generally making the place their own. The same is true for buy-to-let landlords who will often use a bridging loan to completely refurbish a property before renting it out.

This is money that is flowing back into the economy, providing income for tradespeople, retailers and service providers, as well as jobs for their staff. If we are to see the sustained recovery the country needs, we need to get the housing market moving again after what has been a very difficult period for everyone. The increase in confidence the stamp duty cut is creating will provide a very welcome stimulus, at least in the short term.  

But, in truth, this measure is temporary and only scratches the surface – and it’s questionable whether it will do anything to really help first-time buyers outside of the South East, assuming that is the intent. Most first-time buyers were already paying little or no stamp duty and cutting this further does nothing to alter the fundamentals of demand and supply.

The problem most first-time buyers have is raising a large enough deposit. The availability of high-LTV loans practically dried up during the lockdown period; although some lenders are now coming back to this end of the market, there remains less choice for borrowers, and the rates on offer are less tempting than they were previously.

Many would-be first-time buyers are paying a very high proportion of their income in rent, to say nothing of the cost of utilities, council tax and so on. According to the latest ‘English Housing Survey’ from the Ministry of Housing, Communities and Local Governement, private renters spent 33% of their household income on rent in 2018-19, while those with a mortgage spent 18%. This makes it very difficult to save for a substantial deposit.

One of the reasons rents remain stubbornly high is that the government has insisted on hitting the buy-to-let market with significant tax rises. Landlords need to cover their costs, so increased taxation will inevitably put upward pressure on rents. Many small-scale landlords are already being driven out of the market altogether - further reducing and concentrating supply and likely to exacerbate the problem.

While even a temporary stamp duty holiday is welcome, what is really needed is a comprehensive review of property taxation, which should include stamp duty for both owner-occupiers and private landlords, and also take into account other taxes on the private rented sector. Ironically, it is by reducing the costs attached to the private rented sector, that we can do most to enable more people to become homeowners

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