Stamp duty causes problems at both ends of the housing ladder

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Posted on: 15 August 2017 by Peter Girling

Stamp duty is causing problems for all generations - the young families that need extra space but can’t afford to move, and the older generation that want to downsize but are finding it harder to find a buyer.

A recent report by the London School of Economics and the VATT Institute for Economic Research[i] highlights that stamp duty is making the housing crisis worse as it’s deterring many older home owners from downsizing. We agree.

The report suggests the rate of home moving would be 27 per cent higher if stamp duty was abolished. Many pensioners own larger homes, but with stamp duty on a £2 million home being £143,000 and £20,000 on a £600,000 home – this is putting off prospective buyers.

Stamp duty is causing problems for all generations - the young families that need extra space but can’t afford to move, and the older generation that want to downsize but are finding it harder to find a buyer.

Older generations are also often put off from moving because of stamp duty costs. As house prices have risen substantially over the past two decades, even a smaller home can come with a hefty stamp duty levy especially in popular retirement places, such as the south coast of England.

This can deter retired people who are on limited incomes from moving and they essentially end up rattling around in homes that are too big for them.

We believe something urgently needs to be done to improve this situation and for stamp duty not to be a hindrance to housing mobility. Older people need to be able to move as it frees up larger homes for younger generations. Also many want to.

A new report from house builders McCarthy & Stone[ii] reveals almost half (48 per cent) of over 65s would consider downsizing, especially if they were exempt from stamp duty.

One solution for older people keen to downsize who don’t want to pay stamp duty is to rent. In our experience growing numbers of retired people are choosing this option as it’s a good financial solution and offers many benefits for older people.

Whilst initially renting may not appear an attractive option for someone who has owned their own home, it’s often the security of tenure which is the main stumbling block.

However this isn’t an issue in our retirement apartments as the majority come with an assured tenancy, which means people can stay in their homes for as long as they want. This gives people the same security and peace of mind as owning their own home, but they haven’t had to fork out for stamp duty to be able to downsize.

Other benefits include freeing up capital to spend on their retirement, no longer having to deal with the upkeep of a property, which can become harder as people get older, and access to a ready-made community. Additional services such as a 24 hour emergency Careline in every apartment are also beneficial as people get older.

People need to be given housing choices when they get older whether that’s renting or buying. Something also needs to be done with stamp duty so people are not put off moving; if not we fear the housing crisis is going to become even worse in generations to come.


[i] http://www.dailymail.co.uk/news/article-4773300/Stamp-duty-making-housing-crisis-worse.html

[ii] https://www.mccarthyandstone.co.uk/media-centre/national-press/downsizing-exodus--57-million-elderly-eye-a-move-now-rising-to-11-million-in-under-twenty-years/

 

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Gareth Hargreaves posted 29 August 2017

A good, insightful piece. Thanks for sharing Peter.


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