Stamp duty cuts — for who?

Will first-time buyers or landlords benefit if the Government reviews stamp duty on housing to help the market out post-Brexit?

Stamp duty cuts may be on the cards, with residential developers calling for a stimulus package to get the market moving again.

But the talk is vague, and there are no specifics about whether they want a cut in the amount paid or if they want a cut for investors and second-home owners.

While the housing ladder is blocked up especially at the first and second rungs, recent stamp duty rises have also held back the upper end of the market by making the cost of moving punitively expensive for the rich.

Reducing stamp duty might help them move, but the biggest factor in market clog is the fact that Britain’s landlord community have taken a big perch on the first rung of the ladder and don’t want to sell.

The fewer properties that are available to first-time buyers, the more lucrative it is to rent to the priced-out, which only increases the unwillingness of landlords to sell. [Caveat: this is true while the market remains in undersupply but not when it moves to an oversupplied state]

This trend starts to clog up the higher rungs because there is an increasingly smaller supply of people able to afford second-step homes (beyond, obviously, earlier first-time buyers who the buy-to-let boom’s demand for first-rung properties helped move up to the second rung).

How do you fix this problem, or at least stop making it worse, with stamp duty reform?

Under Cameron’s pre-Brexit government George Osborne, recognising the electoral damage awaiting the Tories in 2020 from Generation Rent, acted by turning stamp duty into a sorting system for people who want one home and other people who want more than one.

He left stamp duty rates as they were for first-time buyers and ladder climbers but added an extra 3% for second-home owners and investors.

This made a lot of sense, but angered developers, who have had a very nice line in selling their newbuild properties to investors and I suspect that is why they are calling for cuts.

But the Government needs tax revenues and with all this talk of foreign investors being ready to swoop on ‘discount’ London property due to the cheaper pound …

We should just keep the high stamp duty rates for overseas second-home buyers — it would provide a tax windfall.

On the other hand, stamp duty could be cut for those moving up and down the ladder, as long as they aren’t adding a second home.

But most importantly, the differential rate that is finally allowing first-time buyers to compete more easily with buy-to-let landlords should stay in place.

Buy-to-let investors, of course, are looking for a return on their investment and have played a part in bringing valuable new supply to the market.

But I can’t help feeling that if people want to invest in property and improve Britain’s housing supply there may a better way for them to do so that doesn’t crowd out first-time buyers.

If, as policy adviser for Shelter and Transport for London Pete Jeffreys recommends, stamp duty policy and receipts are devolved to the Mayor of London, the capital might make some progress on housing.