A KPMG report has suggested that making sellers pay Stamp Duty rather than buyers could provide a much-needed short-term boost to the market as a result of increased buyer demand.
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Back in August, Sajid Javid, the U.K.’s Chancellor of the Exchequer, was rumoured to be interested in a change in Stamp Duty policy – namely, to switch the burden to the seller rather than the buyer. While the rumour was shot down by Javid on his Twitter feed, the story nonetheless reignited a useful debate, and one Javid himself was having during his own campaign to be the latest Conservative Party leader.
The proposals were discussed widely in industry media, and the following month, KPMG issued a report – U.K. Economic Outlook: Britain At A Crossroads – that suggested a switching of the burden might be just the shot in the arm the U.K. housing market needs. It argued that in the event of a no-deal Brexit, house prices are expected to fall by approximately 5% on average, possibly more. It also suggested that making sellers pay Stamp Duty rather than buyers could provide a much-needed short-term boost to the market as a result of increased buyer demand.
The right move?
But is the report correct? Is it wise to shift Stamp Duty from the buyer to the seller? Well, yes and no.
Certainly, it would cut costs for the majority of house-movers. Most people who sell a home with a view to buying a new one end up in a more expensive property. As such, they’d be paying Stamp Duty on the cheaper home, and that would give them more money to invest in their next property.
The Association of Accounting Technicians (AAT) agrees. Phil Hall, Head of Public Affairs and Public Policy, told the BBC that “switching liability would be considerably fairer, simpler, more effective and cheaper than the current stamp duty regime.”
Notably, every first-time buyer would instantly be exempted from Stamp Duty entirely, and there’s a debate that it would be a far better incentive for them than the current government-backed Help To Buy scheme – which is drawing to a close in 2023.
Nevertheless, it’s not a policy without its downsides.
Pushing the tax onto sellers would clearly be damaging for those looking to downsize their existing property, since they would end up paying more under this kind of scheme. At a time when 25% of over 50s are already struggling to afford the cost of moving house, such a decision could make matters worse.
What’s more, even the KPMG report indicates that any benefits would be short-term. Once the market adjusts to the new system, transaction volumes are likely to slow. Much as with the aftereffects of the Tenant Fees Ban, shifting the Stamp Duty to the seller will likely just lead vendors to increase their asking prices, further putting off buyers in an already price-inflated market.
Final thoughts
Ultimately, while there is a lot to be gained from switching the tax burden, a simple rate cut is still the government’s most likely and most beneficial path forward. It would give the market the boost that it’s after, and would also generate the right kind of headlines, just as the country looks set to head to a general election.
With U.K. politics so predominantly focused on Brexit, it is encouraging to see the incumbent government raise housing as one of its main pillars. A healthy housing market is the backbone of a healthy economy and any political will and energy expended towards aiding the recovery of the housing market is something to feel positive about.
That said, the government can’t treat their promises as empty election rhetoric, and if cuts are pledged, then they need to come soon. As one agent told Estate Agent Today, “the problem with the Chancellor making sound bites about SDLT reforms in the next Budget is that they hold back transactions which would have otherwise taken place, since people want to benefit from any changes, before they commit themselves.”