Barrier hindering property market growth in Britain and innovative strategy to alleviate the brake
In the ever-evolving landscape of the UK housing market, a potential solution to ease pressures on younger families seeking larger homes is gaining traction: stamp duty relief for downsizers. This proposal, suggested by Nick Leeming, chairman of Jackson-Stops, aims to encourage older homeowners to move into smaller properties, thus releasing family-sized homes onto the market.
Stamp Duty: A Barrier for Downsizers
Currently, stamp duty acts as a significant barrier for older homeowners looking to downsize, particularly in areas like London and the South East where tax bills can exceed £25,000. This financial disincentive keeps many homeowners in larger homes longer than desired.
Unlocking Housing Supply
Research indicates that if stamp duty on downsizers' next purchase was reduced or removed, approximately 15% would downsize within 12 months, releasing around 505,000 homes onto the market. Over longer timeframes, this effect grows substantially, potentially releasing 1.4 million homes within two years and over 2.5 million homes over five years.
The Trickle-Down Effect
This policy would not only increase the availability of family-sized homes but also encourage a trickle-down effect. Downsizers moving out would facilitate upsizing by younger families, freeing up smaller properties for other buyers, including first-time purchasers.
Benefiting Supply and Economic Activity
By lowering the financial disincentive posed by stamp duty, this relief would unlock substantial housing supply, helping to reduce market bottlenecks and improving accessibility to well-sized homes for young families. Furthermore, it would stimulate property transactions, benefiting both the supply and economic activity of the housing market.
A Boon for Families in London
In areas like Wandsworth, Clapham, and Battersea, where the cost of moving can feel like a penalty rather than a step forward, any measure that helps people find a family home could only be a good thing. This relief could open up opportunities for families seeking more space, especially in areas with small school catchments.
Looking Ahead
Despite the potential benefits, not all older homeowners are keen on downsizing. Jackson-Stops surveyed 2,000 homeowners aged 55 and over in England and found that 22% don't ever plan to downsize. However, proposals such as a one-off Stamp Duty exemption for house movers aged 65 and over, as suggested by Jonathan Brandling-Harris, co-founder of House Collective, could further encourage downsizing and alleviate housing market pressures.
Geoff Wilford, founder of Wilfords London, believes a Stamp Duty break for downsizers could be transformational, particularly in areas with small school catchments. As the debate continues, it's clear that finding solutions to unlock the housing market and make family homes more accessible is a priority for many.
Addressing Stamp Duty as an Investment Opportunity
In light of the potential benefits that this stamp duty relief for downsizers might bring, one could argue that it presents an attractive investment opportunity for the real-estate sector. This proposal could prompt older homeowners to invest in smaller properties, which subsequently would be resold at a profit due to increased demand.
Consolidating Efforts to Enhance Affordability
Furthermore, the consolidated efforts to enhance affordability within the housing market by addressing stamp duty barriers for downsizers could create synergy with other investment strategies. Investors actively engaged in housing market trends, such as those focusing on housebuilding, renovation, and serving first-time buyers, may find this development advantageous in improving the overall economic health and accessibility of the real-estate market.
