Stamp duty on a home should be paid by the seller, rather than buyer, according to Yorkshire Building Society.
The mortgage lender, one of the biggest in the UK, is proposing a massive shake-up of stamp duty rules to the Government ahead of the Autumn statement, due in November.
By shifting the responsibility of stamp duty to the seller, this will have a number of benefits to all parties, as well as the country’s economy.
More first time buyers
It’s well reported just how difficult it is to get on the property ladder in this day and age, even with saving incentives like the Help to Buy ISA. House prices are rising faster than wages, so gathering the appropriate deposit can feel like chasing a runaway train.
Trying to squirrel away 10% for a home deposit is tough enough; to then have to find an additional 2 – 5% as stamp duty (not to mention solicitor fees, surveyors and other moving costs) can seem unachievable.
But if stamp duty becomes the seller’s responsibility, more than 225,000 first time buyers would have an even greater chance of getting on the housing ladder. The average first time buyer would actually save around £3,791, and £13,171 in London.
Sellers saving money
Shifting stamp duty responsibility wouldn’t just save buyers money; it’d save the vast majority of sellers money too.
As most sellers are moving out of their home into something bigger and with a higher value, their stamp duty bill would be reduced.
Currently, buyers pay the following in stamp duty depending on the value of the home:
|Price Band||Stamp Duty|
|£125,001 – £250,000||2%|
|£250,001 – 925,000||5%|
|£925,001 – £1.5m||10%|
This new rule would apparently save second and third home buyers £4,093 on average. Selling homes and ‘moving up the ladder’ would become a more viable option, releasing more housing stock to first time buyers and making the whole process easier and much more achievable.
An economic boost
Increased home sales would have quite an impact on the economy. These proposals from Yorkshire Building Society first came about following the Brexit vote to leave the EU, as a way to ease the projected decline in property sales.
Their research revealed the proposed changes would mean an extra 16,000 property transactions in the first year, with 6,000 of those being first time buyers.
This is a 2% increase in transactions, making the Treasury an extra £156m in taxes: not an insignificant figure.
Andrew McPhillips, chief economist at Yorkshire Building Society, said: “The Prime Minister has pledged to make intergenerational support a key measure of her Government’s housing agenda and this measure could achieve exactly that.
“This will not solve every cause of the housing crisis but reforming stamp duty could ease its effects by making homes more affordable.”
Could it work?
There have been big changes made to stamp duty before. In 2014 it was overhauled to make it cheaper for home buyers. And just this year, stamp duty doubled for those buying a second home in a bid to reduce the number of Buy to Let homeowners, and release housing stock back into the market.
But this is a significant change to the way stamp duty works. As such, it would need major consideration before being implemented.
Paula Higgins, chief executive of campaign group the Homeowner’s Alliance, said: “We called for this years ago. It make a lot of sense to put the stamp duty cost onto sellers.
“Stamp duty is a huge barrier for people trying to move. If they’re paying it on the property they’re coming from then it’ll be cheaper and it’ll stop people staying in homes that aren’t suitable for them, which clogs up the system.”
Would it be the right move?
Even if the Government decides this is feasible, would people be happy with the change? Anyone who’d been hit by a big stamp duty bill in the past would rightly be put out. Unfortunately, that’s the nature of changing policy.
A comparethemarket.com survey found nearly one in three homeowners who weren’t willing to move would actually consider it if they were paying the stamp duty on their current home, rather than the purchase. And first time buyers would see the average saving period for a first home deposit fall to 15 months (and four years and four months in London).
One big concern would be those downsizing, particularly later in life. Paula Higgins recommends the Government allow these ‘last time movers’ to defer the payment, something that could be a possibility given political parties’ tendency to appeal to older voters.
Overall, public opinion will likely remain split. A poll on The Telegraph’s website currently sits at 49% of voters for the change, and 51% against.
It’ll be interesting to see whether an organisation as large as Yorkshire Building Society has any sway to convince the Government, either in the Autumn statement or in the near future.
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