‘Focus on supply, not demand’: Industry responds to stamp duty cut

Industry figures have warned that the government’s plans to slash stamp duty land tax risk damaging efforts to produce more affordable housing and encouraging “extreme upward pressure” on housing prices, calling instead for greater focus on boosting supply. The reduction, to be unveiled on Friday, has been described as a “rabbit” to be pulled out of the hat in the mini-Budget, which is intended to spark the UK’s return to economic growth. Some industry figures have embraced the proposal. Jeremy Raj, national head of residential property at law firm Irwin Mitchell, said: “SDLT is a bad tax that inhibits the market and is excessively complex and unfair. There are not many levers available to the government right now, but this is a good one to pull.” Raj added it would “stimulate confidence and activity in the market, both of which are needed in order to help people secure the accommodation that is right for them, and to help prevent further backsliding of the economy”. Housing affordability at risk However, others were far less impressed with the plans. Avinav Nigam, co-founder and chief operating office at IMMO Capital, which has been buying up housing in the UK, said a cut at this time “risks worsening housing affordability even further”. Far from helping people to buy homes, he said Truss’s plan would be “stoking short-term demand in a supply-constrained market, and it risks pushing up prices, just as we were starting to see signs of house price growth moderate in recent months”. Dave Sheridan, executive chair of Ilke Homes, said: “The past two years have taught us that demand-side solutions do little to help cool house price inflation, with prices reaching record highs since the onset of Covid-19 and the introduction of Rishi Sunak’s own stamp duty cut in July 2020.” Instead of tinkering with demand, “policymakers must focus on supply-side solutions”, added Sheridan. “Rampant growth in house prices is a direct consequence of lacklustre productivity across housebuilding, with the UK failing to deliver more than 300,000 homes since the 1960s,” he said. “Only by addressing mismatches between supply and demand can we make housing more accessible across the board.” Gregory Dewerpe, founder of A/O PropTech, said: “It’s clear the government has learned little from the housing market feeding frenzy during the pandemic, where a cut in stamp duty did little other than put extreme upward pressure on prices. Switch focus to sustainability “We shouldn’t be making it easier to buy a house, but to make our houses greener. Scrapping tax for building retrofits, or limiting stamp duty cuts to energy-efficient homes, would incentivise the market to prioritise energy efficiency rather than needlessly stimulate demand for an already tight housing supply.” IMMO’s Nigam agreed: “The money a stamp duty reduction would cost the Treasury could be better used towards retrofitting Britain’s housing stock, some of the oldest and leakiest in Europe.” Pete Ladhams, managing director of Assael Architecture, also urged more focus on supply. “Truss’s government must be laser-focused on increasing housing stock over short-term stimulus to prop up growth,” he said. “As tempting as it may be to take the path well-worn and resort to stamp duty cuts and tax incentives, these unsustainable solutions will not motivate those in under-occupied homes to downsize, or secure housing affordability for first-time buyers hardest hit by spiralling house prices.” But Tom Bill, Knight Frank’s head of UK residential research, said the move would both lower prices and inflate them. “It will trigger higher levels of demand in the housing market at a time when mortgages are getting more expensive, which will support social mobility. Prices could spike higher in the short term if supply initially struggles to keep up but more balanced conditions will return provided the cut is immediate and permanent.” Bill added: “Nobody can accuse the new government of lacking an economic vision.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews Photo © Kirsty Wigglesworth/AP/Shutterstock