Respondents to the RICS Residential Market Survey suggested overhauling current UK housing tax and scrapping stamp duty
In order to rebalance and reignite the UK housing market, respondents to the RICS Residential Market Survey suggested overhauling current housing tax and scrapping stamp duty on certain properties, could potentially help thousands more young people own their own home.
RICS agrees that those with larger homes should be incentivised to move into smaller properties by becoming exempt from stamp duty, saying the move could see existing housing stock distributed more efficiently and becoming better matched to housing needs, benefiting the entire housing chain.
Removing Stamp Duty altogether and adjusting Council Tax rates to account for lost revenue was also seen as a viable option by just under 20% of respondents. Anecdotally, respondents suggested, scrapping SDLT would shift the burden away from the transactional phase and onto occupation, freeing up funds in the buying process.
RICS added that the current system of residential property taxation is “deterring existing homeowners from moving, especially if they feel the money spent on tax could be put to better use in the current economy”.
Further recommendations from the survey included extending the Government’s Help-to-Buy scheme past the current 2021 deadline, but only for first-time buyers.
RICS policy manager, Abdul Choudhury said it is not surprising that their professionals feel that residential property taxation is out of kilter. If they 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 there is need of 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 Council taxes, on the other hand are woefully out of date and are highly politicised.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 an SDLT exemption for downsizers could free up larger, underused properties; but will likely provide them with a market advantage over other participants. Similarly, replacing SDLT 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.
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.
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. SDLT 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, it will be developing a critique of the housing buying tax options available to Government in the near future.