With a mini-Budget or a non-Budget ‘Budget’ on its way imminently, the industry has returned to one of its favourite pastimes – calling for changes to stamp duty. A perennial delight that never fails to materialise at such times.
Whether it’s for first-time buyers, last-time buyers, landlords, or everyone in between, there appears to be no buyer demographic that wouldn’t be served by a change to the current stamp duty structure.
The latest report I read focused on last-time buyers and is from the Cass Business School and the Centre for the Study of Financial Innovation, which (quelle surprise) calls for older homeowners to be encouraged to downsize and – you’ve guessed it – the catalyst for that encouragement would be to exempt ‘last time buyers’ from stamp duty.
Taking away the inherent difficulty that such a move would introduce – actually, let’s not take that away, because it would be a fundamental in bringing this to the table. Firstly, how do you define ‘last-time buyers?’ There may be people in their 20s/30s/40s and 50s whose next house purchase could be their last – they just don’t know that yet.
Who is to say that it won’t be? Indeed, if you put an age on it, who is also to say that someone ‘downsizing’ in their 60s/70s/80s, etc, won’t then move again? Would they then need to pay that stamp duty back? What about the definition of ‘downsizing’? Who determines if downsizing takes place? What do you base it on – the number of bedrooms? Or the price of those properties?
It seems like you open up a veritable can of worms in terms of setting up such a system and then policing it, and I’m also unconvinced that stamp duty acts as the barrier many people think it does to older homeowners moving. In fact, I’m not convinced it acts as a barrier at all.
There are all manner of reasons why older people don’t move, or downsize, and I suspect the cost of stamp duty is not high on that list. Finding the right property in the right location, not wanting to move out of the family home in the first place, being able to stay close to support networks and/or family, etc. These are emotional considerations which, in my opinion, trump the cost-savings of not having to pay stamp duty.
Indeed, you might well question a client in such a circumstance, who had not showed any inclination to move but only did so off the back of a stamp duty holiday. Have they really thought this through?
And, of course, if the inclination to downsize is based on a desire to free up money in a property, then there may need to be a healthy dose of realism administered. For every, older property owner who can move to a smaller, cheaper property, and make a sizeable profit, I suspect there will be one who finds that the property they want, in the area they want it, is rather more expensive than they believed it to be. Those much-sought after ‘places by the sea’ do not tend to come cheap.
Which is why I’ve always taken the arguments that ‘downsizing’ should be the first option considered for such homeowners to be somewhat flawed. Of course, in a yesteryear where there were few other options to realise the value in a property without selling it, you can understand this ‘advice’. But, now with a much larger number of products and options available, including of course equity release, RIO, later life mortgages, second charges, other finance options, etc, then downsizing should surely be considered along with all of these, not instead of?
As with any stamp duty ‘incentive’, what tends to happen is that it helps those who were already planning to go ahead with such a move, rather than entice new participants in. Just as, for first-time buyers, the saving of a couple of thousand pounds of stamp duty is not generally going to make the difference in purchasing – it just perhaps gets them to a deposit goal sooner – the same might go for last-time buyers. That ‘saving’ will not be the determining factor.
What we might therefore do better, is educate older homeowners about the greater number of options available to them. After all, taking out equity release will not incur a stamp duty cost, if that’s a big concern? And, ultimately, is the decision one about wanting to move or realising equity? The advice will be very different depending on the motive – it’s important therefore to have access to all the options for such clients and a full kitbag in order to get them to the right outcome with the right solution.
Stuart Wilson is CEO at Air Group