Stamp duty reform will encourage downsizing for “last-time” buyers
The UK Government is set to announce temporary reforms in an attempt to unlock the stagnating housing market.
Coronavirus is the latest setback for the sector, with incomes and house prices set to fall in the aftermath of the pandemic and subsequent lockdown. Chancellor of the Exchequer Rishi Sunak is expected to introduce short-term cuts to stamp duty – a tax imposed when buying property in England or Northern Ireland – to incentivise investment.
Professor Les Mayhew, Professor of Statistics at City, University of London’s Business School and author of Too Little, Too Late? Housing for an ageing population, welcomes the move and believes the changes will allow older people to downsize more freely.
Professor Mayhew said:
"Residential sales have been flat since the financial crisis and have taken another huge hit with Covid-19.
“The Government needed to do something to revitalise the market and I believe that this will help get things going again. The cut to stamp duty has been billed as temporary but it was needed before the pandemic and I think it will last until the housing crisis is over, which could take years.
“Stamp duty is often cited as the main reason why people are unwilling to downsize, another being a lack of suitable properties. By downsizing, a couple can gift the equity released from the sale of the original home to friends or family and avoid Capital Gains tax if it was their main home, but also potentially avoid Inheritance Tax if they live another seven years.
“The newly announced threshold will apply to all, not just first-time buyers who are nil-banded on any property under £300,000.
“Who benefits the most would depend on the new threshold. In areas like the South East where typical family houses can cost upwards of £600,000, buyers would still have to pay £20,000 if the threshold is increased to £500,000 – as is the figure being reported. In fact, an allowance rather than a threshold would help avoid this particular cliff edge.
“The changes will hugely benefit older, “last-time” buyers who can downsize and buy property underneath the threshold. This is excellent news because retirement homes and apartments are usually a bit cheaper, depending on location and type of property.
“Another big measure needed to help the market is to increase the supply of retirement housing. At present the sector accounts for just three per cent of new builds and is not helped by indifference in local authorities to retirement housing.
“To this end, I would also argue for a more joined-up approach between housing and health departments because there is increasing evidence that retirement housing with easy access to amenities and care reduces hospital admissions, and delays transfer to residential and nursing care.
“In addition to cutting stamp duty, Mr Sunak will also announce additional spending on an energy-saving scheme, which includes retrofitting homes. This is another recommendation I have made, and I strongly welcome this.”
All quotes can be attributed to Professor Les Mayhew, Professor of Statistics at City, University of London Business School.