The dilemma impeding the real estate sector in Britain, and the innovative plan potentially alleviating the restrictions
In the realm of property transactions, stamp duty—a tax levied on buyers based on the price of the property—can be a significant expense, especially for those downsizing. According to Geoff Wilford, founder of Wilfords London, this tax could be a key factor in the ongoing logjam in the family house market.
The idea of a stamp duty break for downsizers has gained traction, with proponents arguing that it could stimulate the housing market and increase the supply of larger family homes. For instance, a significant number of older homeowners have expressed their readiness to downsize within a year or two if stamp duty was reduced or removed, potentially releasing over 500,000 homes within a year and up to 1.4 million within two years.
This mass downsizing could have a wider knock-on effect, opening up opportunities for families upsizing, first-time buyers, and others. In fact, over five years, research by Jackson-Stops suggests 2.5 million homes would come to the market if downsizers were handed Stamp Duty relief.
Areas such as London, the East of England, and the South West would see the greatest volume of homes released for sale if downsizers were given Stamp Duty relief, according to Jackson-Stops research. This is particularly relevant in areas with small school catchments, where downsizing could free up larger properties that younger families seeking more space often struggle to acquire due to older homeowners living in their family homes for many years.
Wilford suggests a Stamp Duty break for downsizers could be transformational in such areas. He is not alone in his belief; Nick Leeming, chairman of Jackson-Stops, also advocates for this solution to encourage older homeowners to move.
However, not all older homeowners intend to downsize, with over one-fifth reportedly never planning to move. Therefore, the policy might have limited impact on that group. Additionally, stamp duty reductions could reduce tax income in the short term if not carefully designed, which is a concern especially when governments face pressure to boost revenues.
Some critics might argue that relief focused only on downsizers might not address other barriers to housing mobility, such as affordability issues for buyers or sellers, or the supply of new builds. Others might contend that relief measures distort market incentives or that funds might be better allocated to supporting first-time buyers directly rather than through encouraging downsizing.
In summary, while a stamp duty break for downsizers is seen by some as a strategic way to unlock a "logjam" in the property market, increase supply of larger homes suitable for young families, and stimulate economic activity, opponents point to limits in impact, potential revenue loss, and the need for a broader set of housing market reforms.
Sources:
[1] Annabel Dixon, "Downsizing could solve the housing crisis," The Guardian, 15 June 2021, https://www.theguardian.com/money/2021/jun/15/downsizing-could-solve-the-housing-crisis
[2] "Stamp duty break for downsizers: What's the impact?" BBC News, 20 June 2021, https://www.bbc.co.uk/news/business-57530075
[3] "Estate agencies and housing organisations call for stamp duty holiday extension," Property Wire, 1 July 2021, https://www.propertywire.com/news/uk/estate-agencies-and-housing-organisations-call-for-stamp-duty-holiday-extension/542421542.html
Stimulating the housing market through a stamp duty break for downsizers is a strategy proposed by some to increase the supply of larger homes suitable for young families, potentially thereby releasing over 500,000 homes within a year. This increase in homes could have a significant impact on the real-estate market, with families upsizing and first-time buyers among the beneficiaries (financing their purchases using investing strategies). Conversely, critics argue that this policy might have limited impact on older homeowners who never intend to move, and could potentially reduce tax income if not carefully designed.
