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Brexit is stalling the housing market, it’s time to abolish stamp duty – Phillips

by: John Phillips, group operations director at Just Mortgages
  • 12/09/2018
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Brexit is stalling the housing market, it’s time to abolish stamp duty – Phillips
We know the housing market is struggling. Figures released last month from UK Finance showed the market has seriously slowed down, especially among home movers where activity is down 7.9%.

 

And it is not because people don’t want to move. In fact, I think people do want to move, but they are reluctant to do so for two main reasons.

One, because Brexit is looming and it is making people uneasy about making big changes.

Two, because stamp duty is so high, people are not prepared to shell out thousands of pounds, just to move.

This is especially so for those who may be downsizing – paying out to move to a smaller house seems crazy.

Furthermore, with house prices dropping in some areas, people find it quite hard to get their head around paying stamp duty on an asset that may well go down in value.

 

Economy needs people to move

So many of those who do want to move are staying put.

Some may move once we know a bit more about what is going on with Brexit, but others may just stay put.

And this may not sound like a major issue, with many happy to see the housing market slow down, because inevitably, that brings down prices. But this brings its own issues such as negative equity and so on.

The trouble is the UK economy needs people to move house – it is what keeps everything moving.

If people don’t move many other industries are impacted, for example, furniture retailers, carpet and flooring companies, decorating and DIY stores, and kitchen and bathroom manufacturers.

 

Reject job opportunities

There are also the knock-on costs from the fact that people who do really need to move don’t.

For example, why move for a job that might not last?

Instead, people are more likely to either not take the job, or take it but opt for a longer commute, adding stress to both themselves and the transport network, resulting in more money needing to be spent on roads and railways.

And when it comes to older people who cannot justify the cost of downsizing, many are staying put in homes that may be highly unsuitable for their needs, adding extra pressure to health and social services.

So, if the government wants to fix this, it needs to make a bold statement. And I think that bold statement needs to be a huge change to the stamp duty rules.

 

Scrap stamp duty

The stamp duty cut has been great for first-time buyers, but for it to have a real impact, we need similar incentives for the rest of the market.

Because, if you only cut stamp duty for first-time buyers, all you are really doing is forcing first-time buyer home prices up, as sellers try to add the money saved by not paying stamp duty onto asking prices.

This, in turn, pushed the cost of starter homes up, that increases the prices of all the other homes in the chain, and therefore the stamp duty goes up on all those second and third stepper homes.

So what is the solution?

Ideally, I would like to see stamp duty got rid of altogether.

It is six months until Brexit; so abolishing stamp duty now would give people the incentive they need and the market the boost it needs to get things moving again, and whatever happens with Brexit, at least the housing market would be on the up.

 

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