Conveyancers will face a dwindling workload if stamp duty continues to suffocate the housing market, academic research suggests.
The London School of Economics and the Family Building Society say stamp duty land lax is now the second most important factor influencing older borrowers on whether or not to downsize their homes in their report, A taxing question: is stamp duty land tax suffocating the housing market?, published today.
Three in 10 people who bought a property in 2007 said stamp duty was a 'very important' or 'decisive' factor in their purchase; 45% expect stamp duty to be very important or decisive when they next buy a home.
Four in 10 respondents said their next move would mainly be to downsize or move to a retirement property. However, the report states that respondents are less likely to move because of stamp duty and a 3% surcharge if they do not sell their first home in time.
Stamp duty also limits people's help to buy a property without their parents' help, the report finds.
Under an old ‘slab’ system, homebuyers paid stamp duty at a single rate on the entire property price. In his 2014 autumn statement, then chancellor of the exchequer George Osborne announced a 'slice' system for residential properties, which was extended to non-residential properties in 2016. Also in 2016, the Treasury introduced higher rates for additional properties.
The report says there is 'near consensus' among economists and policy experts that an annual property or land value tax, or an improved version of council tax, which could raise the same revenue as stamp duty, distort the housing market less, and provide incentives aligned with housing policy objectives.
The report concludes: 'Inevitably there would be winners and losers from any tax change, but carefully designed transitional arrangements could mitigate effects on individual households. The phased reduction in mortgage interest tax relief in the 1980s and 1990s, and the eventual abolition of the relief in 2000, show that sensible tax change is possible. A brave government should at least start the process of shifting taxation away from transactions necessary for a flexible housing market.'
The report comes as the government tackles what it considers a 'broken housing market', which could include encouraging buyers and sellers to retain the same conveyancing solicitor.