Scrapping stamp duty could unlock an extra 300,000 housing transactions each year, according to Rathbones.
With speculation mounting ahead of the Autumn Budget that the Government could revisit property taxes, including stamp duty and council tax, Rathbones is calling on policymakers to judge reforms not only on the revenue they raise but on whether they support economic growth and the productive use of housing wealth.
According to the wealth manager, abolishing stamp duty could increase housing market activity by more than 25%, equivalent to over 300,000 additional housing transactions every year.
Jay Lawrence, investment director at Rathbones, said: “Property taxes influence how people behave. We increasingly hear from clients who are staying in homes that no longer meet their needs because moving simply doesn’t stack up financially.
“Many older homeowners tell us the costs of downsizing can wipe out much of the financial benefit, while younger families face significant barriers when trying to move into homes that better suit their circumstances.
“When people are discouraged from moving, the impact extends far beyond the housing market. Labour mobility falls, homes are used less efficiently and opportunities for economic growth can be constrained.”
The debate comes at a time when housing has become one of the UK’s largest stores of wealth. Around 40% of household wealth is held in residential property, equivalent to more than £5.5 trillion.
The challenge is house prices have risen much faster than earnings. In the early 1990s, the average UK home typically cost around three to four times average earnings. Today, that figure is closer to eight times earnings nationally, with that figure even higher in some parts of the UK.
Lawrence added: “Britain has accumulated an extraordinary amount of wealth in housing. The question is whether the tax system encourages that wealth to remain locked away or helps create the conditions for some of it to flow more productively through the wider economy.
“Strong economies depend on people, homes and capital flowing to where they can be used most effectively. Property tax reform will always create winners and losers, but the ultimate test should be whether it supports a more productive and prosperous economy.”
Main image: alicia-christin-gerald-bV7WI-AeiTA-unsplash
