The Autumn Statement on 23 November is a real opportunity for the Government to offer a much-needed boost to the housing market by cutting stamp duty fees according to housebuilder Millwood Designer Homes.
The stamp duty measures brought in by George Osborne earlier this year have had a negative impact on the housing market as a whole, particularly at the top end of the market and for the buy-to-let sector. John Elliott, Managing Director of Millwood Designer Homes is urging the Chancellor to offer some good news by reversing these fees: “Cutting stamp duty will not only free up the market and help mobility; it will also result in increased revenues for the Treasury so it’s a win win for the Government. To keep our jobs market performing and our builders building, people need to be able to move house and reforming the stamp duty system would be a way to encourage that.”
Since April anyone purchasing an additional property has had to pay an extra 3% in stamp duty fees. This applies to anyone owning up to 15 properties, encompassing a huge number of small scale landlords that so much of the UK’s rental sector is made up of. The nation already faces a critical shortage of rental housing, with at least 1.8 million more households looking to rent rather than buy a home by 2025 according to RICS. It has been widely reported that landlords will be seeking to increase their rents over the next few years, to neutralise the effects of the surcharge and also the tapering removal of relief for many their costs in owning a buy to let.
Many people do not appreciate or understand they will be liable for this surcharge if they have not their existing home by the time they buy their new home. True it can be reclaimed, but the very thought of going through a government system to reclaim the tax that should not have been imposed in the first place is an anathema to many.
John Elliott said: “Charging landlords an additional 3% on top of their already hefty stamp duty fees is not the solution to creating a healthy and competitive rental market that offers fair value to tenants. The introduction of the surcharge was an ill-advised attempt to blame buy-to-let landlords for the shortage of available homes and restrict them from buying the new homes meant for first time buyers, young families and other would-be homeowners. However clearly it is not the fault of the landlords that there is such a shortage of new homes being built and it is up to the Government to see through their commitment to building 300,000 new homes a year.”
Many in the property market believe that a reduction in stamp duty will help free up the market, enabling people to move house. It is often a real struggle for people to bear the costs of stamp duty, which can run to tens of thousands of pounds, on top of the already high property prices especially in London and the South East. If people are prevented from moving house, the Treasury does not make the income it needs from stamp duty and the hikes in cost would have been self-defeating. Already the public annual income from stamp duty receipts is down 2.5% to £7.3bn as a result of the reforms imposed by George Osborne.
There was a rush of property purchases in March this year before the stamp duty rises were introduced and in the months following, transaction levels tumbled. It is at the upper end of the market where the slow down in transactions – partly as a result of stamp duty hikes – will hit the public purse the most. The amount of stamp duty raised from homes priced over £1million makes up 36% of the revenues, but just 1.6% of total transactions.
John Elliott continued: “For houses costing more than £1.5m, the tiered system for stamp duty now means purchasers are paying 12% on the proportion of the purchase price over £1.5m, which is 25% more than previously and clearly an unsustainable level to expect people to pay. Especially with the surcharge as well! It would be a quick win for the Government to reform stamp duty in such a way that would result in increased positivity in the property market. Given the wider economic and political picture, the Government would do well to make some positive announcements in the Autumn Statement.”