While it may be tempting for the Chancellor to look to the housing market to fill her ‘black hole’, particularly as she has promised no tax rises for ‘working people’, it is important that she also encourages growth, job and social mobility, and transactions. Affordable private and social housing shortages need addressing, along with record low planning approvals. Development must be viable, as well as attract external investment.
Of all the speculation and announcements currently circulating, the Conservatives’ pledge to abolish Stamp Duty if they form the next Government, is the most welcome. Stamp Duty has proven to be an excellent revenue raiser but is also a deterrent to mobility, upsizing/downsizing and economic growth. Stamp Duty reduces liquidity and distorts pricing in the existing homes, as well as new-build, market. We have long felt that genuine first-time buyers (FTBs) shouldn’t pay at all – they are the engine room of the housing market helping to unlock transactions further up chains.
But be careful what you wish for. The revenue generated by this hugely unpopular tax will have to be replaced as it is paid on 83% of purchases – but there must be a better way. We certainly need an urgent debate to determine what alternative is going to have the least impact on activity.
Other options have been mooted, such as a tax on owner-occupiers or landlords who are selling, or an annual Mansion Tax on larger properties, but will those affected be able to pay in instalments and what impact will it have on downsizing, which is already difficult? If tax is imposed on sellers, at what level will that be, and what are the legal implications? For example, if you bought recently and paid Stamp Duty, is it fair that if you had delayed your transaction by several months that you could have saved tens of thousands of pounds?
A review of council tax is desperately needed, as value changes since 1991 have been considerable in some areas. Those areas where there has been lower price growth have seen higher bills but due to the lack of revaluation, the system is now incredibly unfair. An update is essential but this will take time and cost money – in the meantime, adding more bands to cover higher-value homes would bring in more revenue but problems and inequalities will remain until the entire system is overhauled.
Tax speculation is freezing the market but could mean a stronger post-Budget and rebound in 2026. On balance we would prefer any measures not to compromise activity, raise rents or stop building. The Chancellor would do well to remember that property taxes may be politically easy and keep the party faithful happy but are often highly economically damaging and with minimal revenue generated.
Jeremy Leaf is north London estate agent and former RICS residential chairman
