‘Fantasy economics’: Readers warn of housing chaos if stamp duty is scrapped

S.Tampon tax reform is said to be being considered by Chancellor Rachel Reeves ahead of the Autumn Budget.

Reports suggest the Treasury is considering a new tax on the sale of homes worth more than £500,000 as a step towards a radical overhaul of stamp duty and council tax.

Meanwhile, Conservative Party leader Kemi Badenoch really set the cat among the pigeons by promising to abolish the tax altogether at her party’s conference last week.

However Independent Readers are divided on whether the tax should be repealed; some argue that eliminating the tax is “fantasy economics” that will only increase prices.

“When stamp duty was cut during Covid the spike was so huge it made it even harder for first-time buyers,” one said, while another warned that any savings would just add to deposits and fuel the crash.

Many noted that it would “appeal to the very wealthy” but would “do absolutely nothing” for renters or those currently left out of the housing market.

Alternatives put forward included new exemptions, higher thresholds, rebates to “encourage downsizing” or replacing them with a fairer tax such as a mansion tax.

In general, there was a perception that all options carried risks, from taking money out of the economy to increasing demand and causing house prices to rise further.

Here’s what you need to say:

We need those with the financial means to get their share.

If abolishing stamp duty is part of a package to properly tax property then that’s fine, but I suspect it’s just headline-grabbing with no substance.

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Of course we all hate taxes and want the NHS, roads, bin collection etc. We love the benefits. Unfortunately, we need both, and we also need those with wealth and financial power to shoulder their share and not leave the burden solely on wage earners to shoulder. The UK is a rich country, it’s just that the distribution of that wealth is disproportionately spread out and the situation is rapidly deteriorating.

I’m sorrySurrey

Calling out to those who are well off

The abolition of stamp duty is designed to appeal to the very wealthy, who are likely to see a large increase in stamp duty on properties valued over £500,000.

It does ABSOLUTELY NOTHING to help people struggling to get onto the property ladder, and it also hits the private rental market as house prices rise and greedy landlords looking to expand their property portfolios raise rents to cover their mounting debts.

The Greens undoubtedly won the Conference season with their bold but BRILLIANT idea to extend the right to buy to the private rental market and give tenants a progressive discount and the right of first refusal when a landlord puts a rental property on the market.

Local authorities, who can gradually rebuild social housing stocks and ease huge housing waiting lists if tenants are unwilling or unable to buy, are in second place.

People ReallyThis Might Be Stupid

fantasy economy

There was some speculation well before the Tory conference that Reeves was considering reforming stamp duty or replacing it with something else, so I think the idea thief in this case is probably Kemi Badenoch.

However, removing it without a replacement tax seems like fantastic economics and a quick way to increase house price inflation. Badenoch’s announcement was more akin to cutting Tory National Insurance Contributions, which were unfunded before the last election.

Tanaquil2

Dual purpose of stamp duty

Stamp duty seems to have two purposes: a way to raise taxes (this is also a disguised income tax, although all taxes are taxes on income) and a way to limit (rises in) house prices by taking those taxes out of the housing market.

The latter is necessary because housing shortages push up home prices, but then collapse when rates rise. Removing stamp duty without building more homes would cause trouble and wouldn’t help anyone. This will simply mean that the money to pay stamp duty will now be added to the funds available for deposits, thus increasing house prices… set for a crash.

A lot

Encourage downsizing instead

If stamp duty is preventing homeowners from downsizing, preventing family homes from coming onto the market and leaving people with properties that are too big for them, all that needs to be done is to tweak the tax to encourage downsizing. (Downsizing, moving to a smaller square footage, property with fewer bedrooms, not moving from high-value residential space to a cheaper area.) Maybe offer a percentage discount based on the difference in the higher priced property selling for the smaller property purchase price?

Pedrobay

What are the benefits of stopping this?

When stamp duty was temporarily cut during COVID, the rise in house prices was so large it made it even more difficult for first-time buyers to enter the market.

I’m not sure what the incredible benefits are of stopping this.

Naa27

House price inflation risk

Past stamp duty holidays have caused house prices to rise, meaning buyers paid about the same, were less likely to get a mortgage and had to take out a larger deposit. Perhaps a more limited change that would encourage downsizing, especially among the elderly.

Alexander Boris de Pfeffel Johnson

Increasing supply is the solution

Reducing or eliminating stamp duty will only increase prices. The only way to make property more affordable is to increase the supply, especially of social housing.

BejDave

meaningless nonsense

Most people are aware that abolishing stamp duty is an economic fantasy. So why would Reeves have to respond? The Conservatives’ financial credibility is not nearly as good as Farage’s; so any proposals Badenoch makes now (this far from the election) are nothing more than childish politics. I suspect Reeves will ignore this completely because it’s nothing more than meaningless ramblings from a politician no one takes seriously.

Tabbers

Some of the comments in this article have been edited for brevity and clarity.

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