Stamp duty should be cut on certain properties to rebalance the UK housing market and reignite activity, chartered surveyors argue.
In the Royal Institution of Chartered Surveyors (RICS) Market Survey nearly half suggested using tax incentives to encourage downsizing, while others said making changes to stamp duty and council tax would help thousands more young people realise their dream of owning their own home.
Abdul Choudhury, RICS policy manager, said: “It is not surprising that our professionals feel that residential property taxation is out of kilter.
“If we consider tax in terms of how they disincentivise certain behaviours, SDLT makes purchasing, moving and making more effective use of stock costly at a time when we need all these things. Council taxes, on the other hand are woefully out of date and are highly politicised.
“Any changes to the system of tax should be considered carefully, as they would have disruptive consequences that could negatively impact activity.
“Providing a stamp duty land tax exemption for downsizers could free up larger, underused properties; but will likely provide them with a market advantage over other participants.
“Similarly, replacing stamp duty land tax with council could increase house buying and selling activity; but increase day-to-day living costs at a time when occupiers are already facing higher bills.”
Over one in five thought tax incentives to encourage downsizing could see the existing housing stock distributed more efficiently, matching properties better to housing needs, and benefiting the entire housing chain, as well as addressing the wider housing shortage.
RICS has long called on the government to incentivise downsizing, to no avail. One method suggested is to incentivise those with larger homes to move into smaller properties, by making them exempt from stamp duty.
This would bring more second hand properties to market, benefiting the entire housing chain, and addressing the UK’s wider housing shortage.
Secondly, a reduction or removing stamp duty and adjusting council tax rates to account for lost revenue is also seen as a viable option, by just under 20%.
Anecdotally, respondents suggested, scrapping stamp duty land tax would shift the burden away from the transactional phase and onto occupation, freeing up funds in the buying process.
Choudhury added: “However, given the state of the housing market, it would be prudent for the government to consider the cumulative impact current taxes are having on behaviour and determine what changes can create a more sustainable and vibrant property sector.
“We would therefore urge the government to undertake a full-scale review of the stamp duty land tax system – starting with what it hopes to achieve from this tax in terms of revenue generation, market fluidity or another objective.
“It is imperative that the government recognises that markets need time to adjust to alterations to tax regimes as inconsistency is not conducive to the stable market that buyers and investors need.
“Stamp duty land tax has seen a number of changes in recent years, with the market struggling to adapt to one change before another is introduced.
“Given that RICS professionals are front and centre of the residential market, we will be developing a critique of the housing buying tax options available to Government in the near future.”
Currently, it is estimated that the average first-time buyer requires over £33,000 for a house deposit, with figures significantly higher across the South East and in London.
Another recommendation was extending the government’s Help-to-Buy scheme past the current 2021 deadline, but only for first-time buyers.
And it was suggested the government needs to provide more funding to extend the supply of sub-market tenures and implementing a rental framework that links uplift to inflation.