Possible scrap of stamp duty to boost UK housing market
How long before stamp duty ceases to suffocate the housing market?
According to official reports, chancellor Philip Hammond is said to be considering scrapping off stamp duty for first-time buyers. The potential abolishing of stamp duty will not only benefit first-time buyers but also second-time buyers and overseas investors who are looking to upsize in London. The long-awaited stamp duty reform reports come as we are a few days away from the Autumn Budget speech and have raised expectations for a significant boost to the housing market in Britain.
Stamp duty on UK housing market
According to a report conducted by the London School of Economics stamp duty is a “heavy, immediate tax on transactions that contribute to England’s dysfunctional housing market”.The tax punishes long-time savers across all age groups by discouraging young families to find homes and older people from downsizing and leaving their large properties. First-time buyers are put off by stamp duty costs that amount for a typical home in London more than one-third of average annual earnings in the capital. For second-time buyers, stamp duty rises to 15% of the house sold price making the tax a burden for investors and people who are looking to upsize. Ultimately the unpopular tax has devastating effects on the housing market and the wider economy as it reduces mobility. LSE academia calls for the government to be brave and replace stamp duty with another form of taxation, possibly one that will provide actual revenues as a council tax.
The abolishing of the burdensome tax will be the first step to remedy the housing market, which has been struggling to keep up with demand, by encouraging people to change properties. However, experts and opinion leaders advise caution about the perspective stamp duty cut. Some say the slashing of the tax is highly unlikely since it has brought to the government more than £1bn contributing to the deficit reduction. Others suggest that the tax should be adapted to the current situation of the housing market thus reforming it into a more flexible surcharge that burdens the sellers and not the buyers.
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