The cut in stamp duty for first-time buyers was good news but more needs to be done to help overcome the housing crisis, according to the chief executive of the Family Building Society, Mark Bogard.
It followed a report from the London School of Economics, sponsored by Family Building Society, which found that the tax was preventing many people from moving. This was particularly in London and the South East where property values are significantly higher than elsewhere in the UK.
Bogard said: “While it is welcome, it will do little to overcome the suffocating effect the tax has overall on the wider market. It’s the easiest tax to avoid – just don’t move.
“It is preventing those already on the property ladder from moving which traditionally has freed up housing for first-time buyers.
“We have surveyed our older borrowers and found stamp duty land tax is the second most important factor taken into account when considering downsizing – 10 years ago it was much less significant.”
Chancellor Phillip Hammond abolished stamp duty for first-time purchases up to £300,000 and let the existing rate of 5% apply between £300,000 and £500,000.
Bogard wrote an open letter to Hammond suggesting further changes to the tax to encourage older home owners to downsize to free up the market.
In response, the Treasury claimed that there was no need for further reform because of reforms made to stamp duty land tax in 2014.
Another reason was the fact that downsizing homeowners do not pay capital gains tax on any profit they market.
It also claimed that any stamp duty land tax payable on those who did move would be less than estate agent’s fees.
Bogard added: “That, of course, is not how real people think. It may be how the Treasury thinks about our money.
“But if people have to write out a big cheque to the Revenue, that is their money, out of their pocket.
“They do not think ‘Oh, how lucky am I to have the money because the Treasury very kindly gave me a tax break on my own house!’”
In London and the South East where a downsized home may even cost £500,000, because of strong competition, estate agents fees of 1% means a fee of £5,000 whereas stamp duty land tax will be £10,000.
Bogard said: “The government may well believe that the recent reform has led to an increase in first time buyers.
“Mrs May has been reported as saying that some 4,000 a week have benefitted as a result of its reforms and Help to Buy scheme.
“However, unless there is a big increase in the supply of suitable properties, many of which traditionally have come on to the market from people already on the property ladder moving on, the market will gum up again”.