London homebuyers will be looking with interest at embattled Conservative Party leader Kemi Badenoch’s pledge to abolish stamp duty should the Tories form the next government.
The announcement received a standing ovation within the hall and has been broadly welcomed by the property industry.
Scrapping the property purchase tax would have the biggest impact in the capital, where the average bill is currently £18,065 on a home costing £561,300.
Indeed, sixty per cent of all stamp duty is paid by homebuyers in the south of England, according to property portal Zoopla.
"Stamp duty hits four in five homeowners and two in five first-time buyers across the country, especially southern England where 60 per cent of all stamp duty is paid,” said Zoopla’s executive director Richard Donnell.
£18,065
The average stamp duty bill in London
The average stamp duty bill in London
“We welcome any proposals that remove the financial barriers to moving home. More home moves would support economic growth and the ambition to build more homes,” added Donnell.
More than 800,000 homeowners have put off buying in the past two years citing stamp duty as a major barrier, according to the HomeOwners Alliance.
Nina Harrison, buying agent at Harringtons UK, said: “Right now stamp duty is one of the biggest blockers to people moving, especially in London where even a modest home comes with a punishing tax bill.
“Take it away and suddenly downsizers can move without hesitation, families can trade up, and first-time buyers aren’t distorted out of the market.”
Welcoming the proposal, Tom Bill, head of UK residential research at Knight Frank said stamp duty was the only real lever politicians have to impact the housing market in the short and medium term.
He said: “If bond markets feel confident that it has been fully costed and mortgage costs don’t spike, buyers and sellers would warmly welcome the move.
“It would inevitably have positive repercussions for the wider economy and increase social mobility.
“The only downside is that if the Tories are leading in the polls ahead of the next general election, the housing market could grind to a halt,” added Bill.
But, as popular as it may be with potential homebuyers, scrapping stamp duty would leave a large hole in the public finances — the tax raised £11.6 billion in the 2023-24 financial year, down from £15.4 billion in 2022-23.
Many commentators questioned whether the policy would be deliverable, even as they agreed abolishing the tax would unblock a stagnant housing market.
“The problem is whether the country could actually afford such a big tax giveaway if it ever came to pass. It’s a huge revenue raiser for the Treasury,” said Ms Harrison.
“But ahead of the Autumn Budget, the hope is Rachel Reeves takes note of what her rivals are saying. People want to move, but they don’t want to be punished for it.”
Guy Meacock, director of buying agency Prime Purchase, said: “Removing stamp duty would be transformative but one wonders how on earth the government would finance such a sweeping change.
“More realistically, a rebasing of council tax, using up-to-date property values, would be far more equitable and go some way to helping end the inherent injustice in the system.”
There is also the risk that abolishing stamp duty would push house prices up even further, as happened during the Covid stamp duty holiday introduced by Rishi Sunak in 2020.
Stamp duty land tax (SDLT) is a tax paid by homebuyers in England and Northern Ireland. It is currently calculated in bands with zero per cent payable on anything up to £125,000, two per cent on the portion up to £250,000, five per cent up to £925,000, 10 per cent on the portion to £1.5 million, and 12 per cent on anything above that.
First-time buyers are exempt from stamp duty up to £300,000 as long as the total property purchase price is no more than £500,000.
There is a five per cent surcharge on second homes and a two per cent surcharge for non UK residents.
