2016 stamp duty tax changes have had a crippling affect on property sales, the economy and jobs. It is time to change policy once again.
What was deemed a radical move back in 2016 simply hasn’t worked. It’s time to change policy once again in favour of reasonable buyer incentives to put an end to properties, particularly in the South East, languishing on the market.
The extent of the damage
Far from ‘levelling the playing field’ between prospective homeowners and landlords, the hike has been called a ‘highly damaging’ move which has stalled sales.
On the surface, it can be argued that fewer landlords in the market has released mid-tier housing for first-time buyers and families. However, figures show that sales actually fell by a third in some areas in 2016, and 7% across the UK.
A recent report published by Property Industry Eye explains the extent of the reluctance to buy or sell a year after the changes took place. This June, just 8% of London properties above £2m are under offer, compared to 37% of properties worth under £500,000. We can’t just put this down to political uncertainty. Stamp duty tinkering has stalled the market, which has hit the pockets of decorators, removal firms and numerous other professionals working in the wider property market. Incentives must be brought to the fore to reignite the market and increase tax receipts.
What could be done?
The economy has to be the only consideration for all parties, which includes looking after Britain’s housing stock – which was valued at a record £6.8 trillion at the start of 2017.
The Council of Mortgage Lenders (CML) has called on the government to spare landlords from further tax changes. The impact of tax changes must be assessed before new policies are drawn up, it stated.
In its manifesto, the Conservative Party pledged to look at creating landlord incentives in exchange for longer tenancies as standard. This, however, does not cut to the affordability issue for many of the UK’s individual private landlords - one idea which has been raised includes the creation of Build to Rent incentives for small landlords as the sector gains ground.
Obvious measures to improve landlord prospects include the reassessment of tax relief reductions, which has dropped to 20%, lifting some restrictions to the wear and tear allowance and determining a gradual way to pay capital gains tax on any profits after a sale, which is set to drop from 21 months to just 30 days from April 2019.
What has been encouraging is how lenders have adapted their propositions to today’s low-interest rate economy, and yields have proven resilient despite turbulence.
Unequal supply and demand in the property market continues to prop up the rental market, but it is clear that more must be done to entice landlords back into the market.
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