London’s residential market has been crippled at the knees. The impact of stamp duty introduced by George Osborne that almost ground the industry to a halt has now been compounded by Brexit and General Election stagnation. If the new government – whatever form that government might take – doesn’t take steps immediately, London risks losing its status as a desirable place to live and invest.
In October, the Centre for Policy Studies, an influential thinktank, published a report that “stamp duty on homes is a tax on mobility and aspiration” and called for drastic cuts. Interestingly, the thinktank is headed by Alex Morton who was responsible for housing and planning under David Cameron.
The report suggests that abolishing stamp duty on homes under £500K, along with reducing other rates sharply, would dramatically boost housing transactions and spur new housebuilding. It proposes reducing stamp duty on homes costing £500K to £1m to 4% and to 5% for those above £1m.
Morton created the report in reaction to the fact that house price growth is now at its lowest level since September 2012, according to the Land Registry. If more homes are transacted, developers will be spurred on to build new homes. If more people are encouraged to buy and sell their homes, the residential market will recover to its formerly prosperous levels and the whole economy will benefit. Though the government would earn less from stamp duty, this would be counterbalanced by earnings from greater transactions overall.
However, the report does suggest paying for these stamp duty cuts by placing a levy on non-resident overseas buyers of an extra 3% to help pay for the cuts. Theresa May called for this move earlier this year and a consultation has been carried out. The danger here is that many prime residential properties in London are acquired by foreign owners, providing valuable income for the economy.