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Stamp duty cuts require supply-side impetus

As has often happened in the past, we now learn from The Times that the ‘rabbit in the hat’ is due to be a cut to stamp duty, which would be a welcome surprise but certainly in keeping with the noises coming from Liz Truss since she announced she was putting herself forward for Conservative Party leader. 

Having won that election, there was a need to follow through on some of the tax-cutting measures she announced during the hustings, and therefore we have the somewhat bizarrely-named ‘fiscal event’ – which for all intents and purposes is an Emergency Budget. 

Lack of supply needs attention 

News that stamp duty cuts will be part of the package announced at the event might see a degree of pushback from those who see it as continuing to boost housing demand, when many feel the bigger issue is still a lack of supply. 

Many will sympathise with that argument, although I also don’t want to pre-empt any supply-side boosting measures that may also be announced alongside. And, as some commentators have already pointed out, there may well be a ‘green’ benefit here, if, for example, stamp duty cuts or relief is meshed with the need to improve the energy efficiency of our homes. 

As an industry, we are rightly going to welcome measures that help boost the number of transactions and, history tends to show us, that cuts or holidays to stamp duty result in a jump in activity.  

Filling the government’s purse 

The government too might be looking at the tax revenue it delivered last year – a period when the stamp duty holiday was in full effect – which amounted to a record £14bn and wonder whether a stamp duty cut that increases transaction numbers will actually bring in more tax than the discount ‘concedes’. 

Indeed, there have been plenty of strong arguments put forward over the years regarding the need to reform stamp duty. The suggestion that by removing or cutting this disincentive to purchase, you actually benefit the property market, the taxation income, plus you then generate more activity in an economy within which the housing market plays such a huge role. 

One of the first questions of course that will be asked, which is particularly relevant for our sector, is whether landlords will benefit from this cut, and whether the government might even consider revisiting the surcharge.  

The private rental sector 

It seems reasonable to suggest the cuts to stamp duty could also benefit those buying additional homes – partly due to the complexity of running anything different. However, whether the government does want to reverse some of those policies which have impacted so much on supply in the private rental sector (PRS) remains to be seen. 

Certainly, landlords are going to welcome any cut to stamp duty given the substantial (and additional) amount they have to shell out, and there is undoubtedly a need to try and encourage more supply into the PRS. After a period when many landlords left the sector, perhaps this can help engender more supply, which would have a positive impact in terms of meeting increasing tenant demand.  

Permanent or temporary move? 

The final point about this cut is the likelihood of it being permanent. This should not be a ‘holiday’ but a sustainable reworking of the stamp duty pricing. If that is the case, it doesn’t create deadlines or ‘cliff-edges’ that heap more pressure on our sector, particularly for advisers, lenders, and conveyancers.  

I strongly believe that we should see a more measured approach that is designed to deliver a sustained increase in activity. 

Clearly, it is a policy that would be so much more powerful if there are also supply-side measures announced alongside. Inevitably this move will stimulate activity – and that is good news which we welcome.  

We await the rest of the detail with great interest.  

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