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As the frenzy builds as to what the Chancellor’s Autumn Budget may contain, all eyes are once again on the property market.
According to a recent news story young people are still struggling to get on the housing ladder, despite stumping up around 10% up front. This is proving problematic – as houses become unaffordable, but salaries and wages remain flat, the hopes of many, young and old, ever owning a home become sparse.
During his last Autumn Budget, the Chancellor announced that he was scrapping Stamp Duty Land Tax (SDLT) for first time buyers, purchasing property worth £300,000 or less. However, according to the latest figures, this is yet to have an impact.
The Institute of Fiscal Studies found that 40% of young adults cannot afford to buy one of the cheapest homes in their area, even with a 10% deposit. This is partly thanks to house price rises of 173% over two decades, whilst the average pay for 25-34 year olds has grown by just 19% over the same period.
It’s also getting harder to save. Higher rents have reduced the purchasing power and made it harder to save for a deposit. But, it is not just first time buyers who feel the effect of Stamp Duty.
Recent academic research from the London School of Economics suggests that the rising cost of Stamp Duty Land Tax (SDLT) is hampering the property market and making it difficult for owner occupiers to upsize or indeed downsize.
The stated policy of the successive governments is to free up housing supply for owner occupiers, but the current SDLT regime is not conducive to this. For example, in the South East an ‘average’ family home might cost around £500,000. For a family looking to upsize to a property worth approx. £750,000 the SDLT cost would be an eye watering £27,500, which has in all likelihood already comes from taxed earnings.
Onward, a think tank claiming to create new ideas for the next generation, suggested an alternative. They say offering tenants the chance to purchase their homes from their landlords should be incentivised. For example, buy to let properties could be eligible for 100% capital gains relief if sold to a tenant who has lived there for more than a certain number of years.
Some are calling for SDLT to be reformed, or at best scrapped altogether. However, according to research from Nationwide, the amount collected has soared and now brings in nearly £13bn a year for the Treasury – in Stamp Duty alone! However, the number of transaction in the last decade has tumbled.
All the time SDLT is proving to be a lucrative income earner, it is unlikely the Government will rush into reform. However, more needs to be done to help those looking to get a foot on the housing ladder.