Why the Government needs to reassess second stepper stamp duty

Summertime and the living is easy – well for some, but perhaps not for those of us working in a housing market which is difficult to read at the best of times, but at present seems to be written in a different language.

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Harpal Singh | Broker Conveyancing
10th July 2018
Harpal Singh, Broker Conveyancing
"Even taking 1% off the extra charge would make something of a difference, although my view is that returning to parity again might make the biggest difference "

All the recent data and statistics point to, if not a marked, slowdown in the number of transactions then certainly a noticeable tailing off and, let’s be honest, this has probably been the case for some time. There are likely to be a whole host of reasons for this but clearly, areas like buy-to-let purchase have been affected considerably by not just the increase in stamp duty but also the changes to mortgage interest tax relief which impact on the profitability of a landlord’s portfolio.

We might well have seen an increase in the number of first-time buyer purchases over the last 12-18 months but, let’s not forget, these come from a very low base and we’re still a long way away from the numbers we would need in order to make up for a slowdown elsewhere.

Of perhaps even greater concern is the ability, or otherwise, of those who are already on the ladder – the so-called second-steppers those perhaps one or two rungs further up, and indeed those at the very top who might want to downsize. All these potential purchasers currently find themselves in something of a ‘limbo’ because while prices have flattened out, they are still at a level where the move up becomes difficult, what you ‘get for your money’ doesn’t appear to justify the costs, plus you are likely to need to spend a significant amount in stamp duty and other moving costs in order to get there.

Which leaves many potential purchasers at something of an impasse. This year already we’ve heard of how, once you’ve bought a first property, you are only likely to move perhaps once, at a push, twice again in your lifetime. If this carries on, we will soon reach a point where people are able to buy a home but then have to stay put for their entire lives, despite the need for bigger properties as required by growing families, and the like.

There is of course a danger here that I might come across as scare-mongering but these are real and tangible dangers for the UK housing market, and one can’t help think the Government might need to act sooner rather than later in order to give it the kick up the backside it looks like needing. Clearly, first-timers remain a priority for Theresa May and her Cabinet – as evidenced by the cutting of stamp duty for those first-time buyers purchasing property under £300k last year – but as we draw closer to November’s Budget I can’t help thinking that greater incentives are required.

Stamp duty is often the carrot that’s used to tempt people back to the market, and given it can be tens of thousands of pounds for potential movers, this might well be the blunt instrument needed. If you could make the payment of stamp duty far more palatable to those second-steppers and above, then you could begin to develop a much greater number of chains and transactions. After all, not every first-time buyer can purchase a new-build but they’re going to need those second-steppers to move out of their properties in order to be able to purchase them. We all know that while new property supply has improved, it is still nowhere near enough to cope with the demand. ‘Second-hand properties’ are a vital source of housing for first-timers and they should not be neglected when the Government is looking at housing market solutions.

It may also be deeply unpopular in certain circles but I also think the Government needs to reassess the extra stamp duty paid by additional homeowners, most prominently private rental sector landlords. Even taking 1% off the extra charge would make something of a difference, although my view is that returning to parity again might make the biggest difference in terms of boosting transaction numbers.

If the Government is worried about landlords hoovering up more property then they should not be; the tax relief changes effectively mean that professional landlords will add to their portfolios but the dinner party/amateur brigade are unlikely to return. The buy-to-let sector has become far more professionalised and I believe any changes to stamp duty are unlikely to deter this. Amateur landlords are selling property not buying and any boost will only be taken up by the professionals; there is unlikely to be a flood of investment purchasing from amateurs any time soon and therefore the Government surely has some leeway here.

What the market needs is a boost and, at present, this doesn’t seem to be coming organically. Having been kicked about for so long as a political football with a large number of own goals having been scored, it’s about time the Government stepped up to the spot and scored in the opposition’s net. If it doesn’t then we could have a far greater number of years of hurt to ‘look forward’ to.

You didn’t think I’d go a whole article without a World Cup reference, did you?

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