Stamp Duty campaign hots up: top bank wants incentive for downsizers

A report by Santander says stamp duty cuts should be used as incentives for older home owners to downsize and allow more large properties to come to the market.

The policy is one of several put forward by the bank to improve the market in the short term and to encourage more young people to be able to afford home ownership over the longer term.

Other suggestions include introducing a new mortgage lending model backed by the government to help those without family support to raise a deposit, and the introducing of more flexibility in lending affordability criteria - for example less restrictive ‘stress rates’ for fixed-term mortgages.

It then recommends: “Making better use of existing housing supply and encouraging greater circulation of homes by introducing a stamp duty incentive for downsizing.”

The recommendations are prompted by a large survey undertaken by Santander of 5,002 non-homeowners aged between 18 and 40. 

Over half (51 per cent) of those surveyed said that owning their own home is one of their top life goals – more than having children (27 per cent) or getting married (19 per cent). 

However, 70 per cent of potential first-time buyers believe that the dream of homeownership is already over for many young people, with 64 per cent expecting homeownership to fall for future generations.

The study finds that the sharpest fall in first-time buyer homeownership has been among those on middle-incomes, between £20,000 and £30,000, with homeownership rates falling from 65 per cent in 1996 to 27 per cent two decades later. 

Of the new buyers entering the market today, 64 per cent have household incomes of more than £40,000 and just 16 per cent are individual buyers.

The biggest barrier cited by first-time buyers to getting on the ladder is raising a deposit, followed by getting a mortgage based on their income.

Buyers’ ability to get onto the property ladder is increasingly dictated by the ‘Bank of Mum and Dad’ and family inheritances. 

While industry data shows that 39 per cent of first-time buyers had help from living family, and 10 per cent from an inheritance, Santander’s research found that 40 per cent of potential first-time buyers were relying on an inheritance to boost their deposit.

Nearly three quarters of people surveyed believe that the government should do more to help first-time buyers, over a third want to see Help to Buy extended beyond 2023, and 35 per cent want a cap on rent prices. 

And a third would like to see the stamp duty cuts, introduced by the government in November 2017 for first-time buyers, extended to the first £500,000 of a property’s value.

Santander’s call comes as Treasury figures reveal that a 3.0 decline in transactions led to a 5.7 per cent drop in the government’s receipts from residential stamp duty to £1.86 billion from £1.97 billion in the second quarter of this year.