Almost three-quarters of people aged over 50 believe the Government should allow downsizers in retirement one move without paying Stamp Duty.
New research carried out by Saga show that a quarter of would-be downsizers say they are put off moving because of the costs associated with doing so. Costs like Stamp Duty.
There’s a serious shortage of housing across the country and we can’t afford for would-be right-sizers to be put off because they can’t afford to move.
It is time for the Government to provide a one-off Stamp Duty holiday for owners aged 50 and above who want to move into smaller homes.
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Growing clamour
There are more and more calls for this kind of action to free up under-occupied family homes.
Last year the centre-right thinktank Policy Exchange revealed there are 1.1 million homes in England alone that have two or more spare bedrooms but which are lived in by a single person aged over 65.
It called for last-time buyers to be given relief from Stamp Duty in the same way that first-time buyers are, removing a barrier to downsizing and enabling older people who want to live in more manageable and purpose-built homes.
There’s even the potential that doing so would bring in extra revenue for the Treasury because when people do move house it enables a chain of transactions.
In fact, the Institute of Public Care at Oxford Brookes University have calculated that if it resulted in 10% more transactions, exempting older people from Stamp Duty would generate £186 million extra tax revenue per annum.
Another issue is the lack of suitable properties for older buyers but if there was a sudden wave of cash-rich would-be last buyers then it seems very likely that builders would work hard to capitalise on that in the same way they have tried to entice a wave of Help To Buy first-time buyers.
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Speaking of Help To Buy…
The Government knows the property market isn’t working for everyone. In fact, it put out a report
It could be viewed as ‘help to sell’, encouraging people who live in homes that are too large for their needs to shift down.
There’s certainly appetite, a report carried out by retirement home builder McCarthy & Stone last year found that 22% of homeowners aged 65 and over said they would be more likely to move if there was a Stamp Duty exemption.
So that means there are potentially 2.6 million people who could release an astonishing £230.8 billion in property wealth and also freeing up almost £925 billion in housing stock.
It’s not hard to see that this would oil up the wheels of the housing market, allow older people to move to more suitable properties and help younger people who want to buy family homes but are all competing for a very small number.
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Meanwhile, Help To Buy is providing financial support to would-be first-time-buyers but it’s been criticised for simply providing a financial solution when a key part of the issue is the lack of supply.
In fact, some analysts argue that by providing more cash, it simply hots up the property market as buyers are better able to compete for the limited number of suitable homes.
That pushes up prices which, in turn, creates more wealth for the property-owning baby boomers and leaves the generations behind them struggling with massive mortgage debt.
If you’re going to act to build pressure at one end of the market, it really does make sense to also help vent that pressure at the other.
Buyers operate in chains and I’d suggest that supporting new buyers alone simply creates an unsustainable market.
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But they have so much already
One argument against scrapping Stamp Duty for downsizers is that it’s a perk for those people who have the most property wealth to begin with.
Analysis carried out by Savills last year found that £75 in every £100 of property equity in the UK is held by the over-50s.
Older owner-occupiers have benefitted from years of strong house price growth so they own three-quarters of all equity, totalling £2.8 trillion.
Take just the over-65s and they own 43% of that equity, worth a total of £1.6 trillion.
You can put all that in contrast with the data for the under-35s, which Savills report account for less than £6 in every £100 of equity held by owner-occupiers.
And yes, here am I arguing that we should give them a tax break on top of that wealth.
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Yet the thing is, we need to make the housing market work for everyone. Right now it isn’t, it really isn’t.
Part of the problem is that we need older people whose families have left home to downsize, if they want to. We need their large family homes to come back onto the market to be filled with families who need homes.
We need them to be able to access their enormous property wealth, ideally so they can spend it on day trips with the grandkids or new carpets or older age care or whatever they want and need to spend it on.
Because that way it starts sloshing around the economy instead of remaining crystallised in homes too large for the occupants.
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What if they don’t want to move?
Okay, I know that I want more properties on the market and less wealth tied up in old family homes but please don’t think I want older people to be turfed out of their homes if they don’t want to leave.
But I do want to help them move out if they want to downsize because that will benefit everyone. It’s not just a tax break for older boomers, it’s a vital step in fixing our broken housing market.
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What do you think? Would a Stamp Duty break for older buyers who downsize work? Have your say using the comments below.