Ditching Stamp Duty: A Game Changer for the Housing Market?

The debate surrounding stamp duty is heating up as politicians like Kemi Badenoch propose its abolition for primary residences. This move is seen as favorable among first-time buyers and the housing sector, but the potential impact is multifaceted. It’s posited that removing stamp duty could lead to rising house prices due to increased buyer demand, akin to the home price surges seen during temporary stamp duty holidays.

Currently, many first-time buyers are exempt from paying stamp duty on homes priced up to £300,000, but the challenge remains to raise adequate deposits. Various regions feel the effects differently; for example, 76% of homes for sale in the North East are stamp duty-free for first-time buyers, compared to only 11% in London. The abolition may promote mobility for homeowners looking to downsize or relocate, with studies indicating that stamp duty is a significant deterrent for over 800,000 homeowners who have reconsidered moving plans recently.

The Institute for Fiscal Studies (IFS) labels stamp duty as an economically damaging tax, suggesting that its removal could increase housing fluidity by enabling older homeowners to sell their larger homes to younger families. However, there are concerns regarding the financial implications; scrapping stamp duty could leave a substantial funding gap in the Treasury, estimated between £9 billion to £11 billion by 2029-30. The Conservative party claims that tax receipts would increase due to growth in the housing sector, but questions remain about how missing funds will be compensated.

Finally, while homeownership might see a boost, the shift could negatively impact renters and discourage landlord investments, pushing the balance further towards owner-occupation at the potential cost of rental property availability.