Obstacle hindering Britain's property market progression - and innovative strategy potentially alleviating the problem's grip
In a bid to address the housing market's supply shortage and support retirees, a Stamp Duty break for downsizers is gaining traction in the UK. This policy encourages older homeowners to sell larger family homes and move into smaller properties, thus increasing the availability of larger homes for young families.
The implementation of this relief primarily removes a significant cost barrier. Stamp duty, a state-based tax on property purchase, can be substantial and deters pensioners or retirees from moving. Providing stamp duty concessions or exemptions specifically for downsizers reduces this financial disincentive.
When older homeowners downsize, their larger homes become available on the market, helping to address supply shortages for young families seeking spacious housing. This move also supports retirees financially, as downsizing can stretch retirement savings and reduce living costs. Stamp duty relief combined with other reforms, such as pension asset test adjustments, makes downsizing more attractive and accessible, improving retirees’ quality of life.
However, the availability and scale of stamp duty relief vary across regions, with some lacking downsizer-specific concessions altogether. Housing industry groups advocate for broader, more generous downsizer-friendly policies, including expanded stamp duty relief and simplified selling processes to accelerate this effect.
The potential impact of this policy is significant. Over five years, an estimated 2.5 million homes could come to the market if downsizers were handed Stamp Duty relief. For instance, a downsizer buying a home for £500,000 would face a stamp duty bill of £15,000, a substantial sum that could discourage many from moving.
Experts believe that this policy could be transformational in certain areas, such as Wandsworth, Clapham, and Battersea. Geoff Wilford, for one, supports the idea, while Annabel Dixon suggests that anything that helps people find a family home in those areas could only be a good thing.
However, there are challenges to overcome. Potential downsizers lack a driving reason to move from window shoppers to serious movers. Nearly half (41%) of homeowners aged 55 and over say they would downsize within two years under the same scenario, while 15% would do so within a year if stamp duty was reduced or removed. Yet, 22% of homeowners aged 55 and over in England don't plan to downsize.
To fully realize the benefits of this policy, there is a need for suitable downsizer housing—quality, accessible homes—for retirees to move into. Developers are encouraged to provide such homes to facilitate this beneficial flow in the housing market, addressing both supply shortages and retirees’ needs.
In summary, stamp duty relief for downsizers acts as a catalyst to free up larger homes for younger families by reducing the financial obstacles to older homeowners moving into smaller, more appropriate housing. This creates a beneficial flow in the housing market, addressing both supply shortages and retirees’ needs.
- The removal of stamp duty could encourage more retirees to downsize, thus making a significant number of larger homes available in the housing market, which could potentially aid young families seeking spacious properties.
- As stamp duty relief for downsizers increases the attractiveness of moving for old homeowners, developers are urged to create suitable, quality, and accessible housing options for retirees, ensuring a smooth flow in the real-estate market and satisfying the needs of both young families and retirees.
