Housing market support won’t work without Stamp Duty reform

Helping people onto the housing ladder will achieve little if Stamp Duty keeps deterring the investors and developers required to get new homes built, an industry expert has warned.

The Government is set to launch a new first-time buyer housing support scheme Your First Home in the Budget later this month, but Stephen Hemmings (pictured), Partner and Head of Property Sector at business advisory firm Menzies LLP, warns that this may not be enough to boost the ailing housing market.

He says: “The property sector urgently needs stability from this Budget, along with a clear signal that the Government wants to encourage investment rather than keep treating property as an easy route to tax revenues.

At present, every fiscal event triggers artificial market activity as investors and businesses try to get ahead of potential tax increases.”

“Over the past 15 years, changes to Stamp Duty Land Tax and Annual Tax on Enveloped Dwellings (ATED) rules have been followed by higher income tax for buy-to-let investors and higher corporation tax for successful developers, and this cumulative burden has done real damage to market confidence.”

He highlights that buyers are also being hit by high interest rates, heavy tax burdens and rising costs, so more must be done to make home buying a more affordable process if the Government plans to deliver its plan for 1.5 million new homes by 2029.

Stamp Duty deterrent

Hemmings adds: “Current Stamp Duty rates deter transactions, particularly at higher values, and cutting them could also prop up the professional services and construction firms that are facing a similar decline.

“New-build homes are the obvious place to begin, and while the Your First Home scheme should draw more first-time buyers into this market, to our knowledge, it does nothing about the 5% surcharge that keeps investors in new rental homes on the sidelines.”

More broadly, he says Britain’s property market needs a proper review of its tax regime and a clear roadmap for the future including on the direction of the Mansion Tax amid rumours of a lower threshold.

Hemmings says” “At present, every fiscal event triggers artificial market activity as investors and businesses try to get ahead of potential tax increases, with speculation over Stamp Duty, capital gains and inheritance taxes rarely out of the headlines.

“This isn’t a healthy way for a market to operate, and if the UK wants to encourage international investment and the jobs and tax revenues it brings, our tax system, including the Stamp Duty surcharge for non-UK residents, needs to reflect this ambition, backed by a plan that delivers long-term market stability before it’s too late.”