-
The stamp duty holiday has helped bring housing transactions
to the highest level since the financial crisis in 2007.
-
It has also warded off a collapse of the housebuilding
sector, with more new builds completed in Q3 2020 than in the
same period in 2019.
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If the holiday ends in March as planned, we risk a slump in
the housing market and housebuilding sector, which will
jeopardise the recovery and deepen the housing crisis.
-
To prevent a slump in housebuilding and help millions of
would-be homeowners, the Government needs to make the new
threshold permanent for primary homes or abolish the tax
outright.
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Such reform would also boost new build construction by an
estimated 20,000 homes per year, while abolition would
deliver an additional 23,500 new builds annually.
The stamp duty holiday has restored housing transactions to the
highest level since 2007.
A new
report by the Centre for Policy Studies looks at the effects
of the measure introduced by the Chancellor in response to the
pandemic, and finds that after an initial sharp decline in sales
between April-June 2020, the number of transactions increased
from 132,090 in Q2 to 225,870 in Q3 and 316,300 by the end of Q4
– the highest level since before the global financial crisis in
2007/8.
The think tank’s research shows that stamp duty revenues actually
rose by 27% in Q3 compared to Q2, from £1.1bn to £1.35bn, and
suggests they will rise again in Q4 given the continued increase
in transactions.
The stamp duty holiday has helped hundreds of thousands of
homeowners – the CPS’s research shows that 87% of people buying a
primary home escaped the deeply unpopular tax thanks to the
holiday, a figure which rises to 93% outside of London and the
South East.
The stamp duty holiday has also acted as a very effective form of
stimulus for the construction industry, giving it the confidence
to keep building rather than seeing housebuilding collapse as in
previous recessions. Between Q2 and Q3, the number of new builds
started rose by 134% from 17,580 to 39,880. The number of new
builds completed rose by an even more impressive 164%, from
16,310 to 43,070.
However, the looming end of the stamp duty holiday risks having a
chilling effect on the housing market – and repeating the housing
bust of 1988 when the market slumped after tax relief was ended.
The CPS is calling on the Government to either permanently
increase the threshold on primary residences to £500,000 or
abolish the tax outright. The headline cost of keeping the
threshold increase alongside the CPSs' proposed reform to the
rates would be roughly £3 billion – but the think tank estimates
that it would actually cost just £500 million once the wider
economic benefits are accounted for, while boosting new build
construction by at least 20,000 homes per year and helping
homeowners, and the economy, adjust to the changes brought about
by the pandemic.
Report Author and CPS Data Analyst, Jethro Elsden,
said:
‘Stamp duty may well be the worst tax on the
UK’s statute books. It places a significant
burden onto prospective buyers and creates huge distortions in
the UK housing market. It damages the economy, and leaves people
stuck in the wrong homes and reduces the number of new builds
brought to market each year, which makes the housing crisis
harder to solve.
‘The introduction of the stamp duty holiday last July did not
just rescue the housing market and construction sector, but
proved conclusively that high stamp duty rates have become a
damaging drag on the economy, the housing market and people’s
aspirations.
‘With the holiday due to finish at the end of March, we urge
the Government to either make the £500,000 threshold permanent
for primary residences, or better yet, abolish it entirely. At
the very least the Chancellor must look to extend the current
stamp duty holiday, or he risks delivering a sledgehammer blow to
the housing market, and the wider economy, just when we need to
be pushing for the strongest recovery possible.’
ENDS
Notes to Editors
