A new report commissioned by the Family Building Society has recommended policymakers to reassess the enforcement of stamp duty for elderly homeowners looking to downsize.
The report, sponsored by Lord Mandelson and Lord Heseltine, argues that older residents are often less likely to downsize due to a lack of financial incentives spurred on by high moving costs and the payment of stamp duty on their new home, encouraging these homeowners to remain in houses that are often unsuited to their needs.
David Hannah, Group Chairman of Cornerstone Tax, whilst welcoming the shift in attention towards the issue of stamp duty, argues that policymakers ought to be focusing on reforming stamp duty at the “lower end” of the housing market, encouraging market activity amongst those taking their first steps on the property ladder.
According to the report, the UK’s housing shortage cannot be dealt with simply by building more homes, detailing that current housebuilding targets will struggle to absorb the current demand alongside the predicted increase of 1.6m households forecasted over the next ten years. Instead, the authors have urged policymakers to use the UK’s existing housing stock more efficiently, the measure to waive stamp duty for older homeowners will certainly stimulate market activity within the higher-end of the property sector, encouraging elderly homeowners to sell up in exchange for downsized properties.
Lord Mandelson told The Times that facilitating downsizing would be a “far swifter way of easing some of the existing housing problems than headline-grabbing newbuild targets”. He added:
“It can be done quite readily. Stamp duty land tax can be changed easily and its impact, as seen during the pandemic holiday, can be enormously beneficial in overall economic terms. It just requires a little creative thinking from the Treasury.”
Hannah, whilst welcoming these new measures, claims that more attention ought to be brought towards stimulating the property market’s lower end. One easy-fix for policymakers would be to reassess the current thresholds for stamp duty payment, homes that are valued at £250,000 or less are currently exempt, with a 5% levy being charged on homes valued between £250,000 and £925,000. However, with the current price of a UK home standing at £288,000, it’s clear that SDLT payment bands are long overdue an overhaul. According to Hannah, those looking to purchase properties on the mid-to-high end of the property market will now have a chance to sell their low-end properties as a result of an increase in demand from prospective buyers. Hannah commented:
“SDLT payment bands have been long overdue for an overhaul as they have never been index-linked to house price inflation. An increase to these thresholds would stimulate activity at the lower end of the property market and allow first-time buyers to reduce the amount they need to borrow, thus improving their affordability calculations.
As we all know, a rising tide lifts all boats, those looking to purchase properties on the mid-to-high end of the property market will now have a chance to sell their low-end properties as a result of the increase in demand from prospective buyers, contributing to further momentum within the housing market.”
