Obstacle preventing property market growth in Britain and smart solution designed to remove restriction on acceleration
Stamp Duty Break for Downsizers: A Potential Solution to Housing Shortage
A proposed stamp duty break for downsizers could help alleviate the housing shortage for young families seeking larger homes, according to a recent study by Jackson-Stops.
The intricacies of the housing market are notoriously difficult to judge, but a wave of new homes for sale could potentially be affordable for young families, thanks to this policy. The idea is to reduce the financial disincentives for older homeowners to move into smaller properties, freeing up larger family homes for younger families.
Older homeowners, particularly baby boomers, tend to stay in larger homes that no longer suit their needs partly due to the significant stamp duty costs associated with moving. Offering stamp duty concessions targeted at downsizers can unlock this housing stock, making downsizing a more financially viable option.
REBAA and other groups advocate for expanded stamp duty relief policies to tackle this issue. Careful policy design can ensure the break is effective without abuse, for example by limiting the concession to one downsizing move per owner or including clawback mechanisms.
According to Annabel Dixon, higher mortgage rates, the cost of living squeeze, and the imposition of VAT on private school fees have all taken their toll on buyer budgets recently. A stamp duty break for downsizers could provide a much-needed financial boost, helping young families purchase larger homes.
If stamp duty was removed for downsizers, more than 500,000 homes could be unlocked within a year, estimates suggest. Over five years, this could potentially release 2.5 million homes onto the market.
In London, the East of England, and the South West, the volume of homes released for sale could be the greatest, according to Jackson-Stops research. In leafy south west London, many older homeowners find the cost of moving not financially viable due to stamp duty on a smaller, more manageable home.
Geoff Wilford, founder of Wilfords London, believes a Stamp Duty break for downsizers could be transformational, particularly in areas with small school catchments. Jonathan Brandling-Harris, co-founder of House Collective, proposes a one-off Stamp Duty exemption for house movers aged 65 and over.
Nick Leeming, chairman of Jackson-Stops, suggests this policy as a solution to encourage older homeowners to move. A downsizer buying a home for £500,000 would currently face a stamp duty bill of £15,000. This break could stimulate market activity, release homes, and generate additional tax receipts that might otherwise be delayed or lost.
Among those who do intend to downsize, 15% would do so within the next year if stamp duty was reduced or removed. Nearly half (41%) of the surveyed homeowners said they would downsize within two years under the same scenario, potentially releasing 1.4 million homes onto the market.
This policy acts as a financial incentive to reduce the barrier of stamp duty costs that often discourage downsizing, helping increase housing availability for families seeking bigger homes.
- The proposed stamp duty break for downsizers could incentivize more baby boomers to move into smaller properties, which could potentially open up large family homes for investing by young families in the real-estate market.
- If implemented, the stamp duty break for downsizers could stimulate finance flows within the housing-market, as more than 500,000 homes could be released for sale in just one year, mainly in regions like London, the East of England, and the South West.
