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The Real Reason Abolishing Stamp Duty Won't Help First-Time Buyers

Strategic Insights

— 2 min read

Abolishing stamp duty for main homes may sound like a straightforward way to boost Britain's stagnant housing market, but research conducted by a team of experts suggests that it would barely move the needle on affordability. In reality, the policy would deliver little benefit to those most in need of help, while handing the biggest savings to wealthier buyers.

Key Takeaways:

  • The UK's Conservative party plans to abolish stamp duty for main homes, but research suggests it would have a negligible impact on affordability and house prices.
  • The policy would cost the Treasury between £9 billion and £11 billion a year in lost revenue, with the benefits going primarily to wealthier buyers.
  • Stamp duty is not the main barrier to homeownership for most people, with the average first-time buyer needing around £60,000 to put down a deposit.
  • The policy would be regressive, helping those already well-off far more than those struggling to get on the ladder.
  • The benefits of scrapping stamp duty would not be evenly distributed, with buyers of high-value homes gaining the most, while first-time buyers and those buying modest properties would see only a small difference.
  • The housing market is shaped by multiple factors, making it complex to predict the effects of policies like abolishing stamp duty.
  • Simulation models like the one used in this research can provide a powerful way to forecast outcomes before they happen in the real world.
  • Addressing the root causes of the housing crisis, such as building more homes, addressing stagnant wages, and improving access to affordable credit, is necessary to make a meaningful impact.

Statistics:

  • The average first-time buyer needs around £60,000 to put down a deposit.
  • The policy to abolish stamp duty would cost the Treasury between £9 billion and £11 billion a year in lost revenue.
  • The stamp duty rates in England and Northern Ireland are as follows: 0% for first-time buyers buying their main home up to £425,000, 2% for £425,001 to £925,000, 5% for £925,001 to £1,500,000, 10% for £1,500,001 and above.
  • The number of first-time buyers in England has decreased by 11% between 2016 and 2020, according to the Office for National Statistics.
  • The UK's property price index has increased by 30.9% between 2016 and 2020, according to the Land Registry.

Sources:

  • The Conversation: "The real reason abolishing stamp duty won't help first-time buyers"
  • Economic and Social Research Council (ESRC)
  • UKRI (UK Research and Innovation)
  • The Labour Party
  • Office for National Statistics (ONS)
  • Land Registry
  • Royal Academy of Engineering

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