Expert examines the difficulties facing the residential market and how to resolve them
There is no doubt that the cost-of-living crisis and the rise in mortgage rates have had a knock-on effect on the UK housing market.
However, as of yet, while we have seen some indices show small drops in property prices, the struggles that people are having with their budgets have not yet prompted material changes.
That said, transaction levels are low, and Charlotte Nixon (pictured), mortgage expert at Quilter, explained that if more stock starts to pile up in the market, prices will drop further. She believes a way to encourage additional stock on to the market would be to abolish stamp duty.
Why the residential market is struggling
“Part of the reason behind why the residential market is struggling is due to consumer confidence in the general economy,” Nixon said.
It is no secret that the UK, as with many parts of the world, is facing difficult economic times; in the face of these challenges, Nixon said buyers are potentially looking to postpone a big move until the direction of travel for the economy becomes clearer.
Improving conditions
Nixon believes that conditions will improve as we move through the cost-of-living crisis naturally and inflation comes under control.
“However, a larger change that might help breathe additional life into the property market over the long term is to consider abolishing stamp duty,” she said.
The government has made various changes to stamp duty over the last few years, with the most recent coming in the form of the stamp duty holiday during the pandemic, which Nixon said due to its tight time limit, served to overheat the market.
“Now the stamp duty cuts are helping to keep the market afloat, but to get rid of the tax completely could be transformational in making the market more fluid and helping all types of buyers in the process,” she said.
By eliminating this financial burden, Nixon said it could result in an increase in the number of people who are willing and able to buy and sell properties.
“This could have a positive knock-on effect, with people more frequently moving to homes that better suit their needs and circumstances,” she said.
In turn, Nixon believes this increased fluidity could encourage economic growth and stimulate the construction industry, ultimately resulting in more stock being built.
She added that stamp duty is often seen as an inefficient and inequitable tax - it does not take into account the broader wealth or income of an individual. As a result, she said it can disproportionately affect people in certain stages of life, or with specific housing needs.
“Abolishing stamp duty could pave the way for more equitable and efficient ways of generating revenue, such as a broader land value tax, or a reform of the council tax system,” Nixon said.
Finally, she believes abolishing stamp duty could encourage downsizing among older homeowners, freeing up larger homes for families who need more space.
“Older people might be more inclined to move to smaller, more manageable properties if they did not have to pay the stamp duty, which would, in turn, help address the issue of under-occupied homes,” Nixon said.
Do you believe abolishing stamp duty could help improve conditions within the residential market? Let us know in the comment section below.
