Stamp duty relief not the way to fix property market, tax firm says

Stamp duty relief would be a “poor tool for managing market behaviour” to boost the housing market and help first-time buyers, according to Cornerstone Tax.

The consultant on property and stamp duty instead suggested that government-backed purchase mortgage guarantees for borrowers would help to “reinstall confidence” in the lending market.

As the property market restarts after the disruption caused by coronavirus, Cornerstone highlighted that a number of commentators have suggested stamp duty holidays as a way to bolster the market, as well as property in general.

However, the tax adviser warned that with low-deposit mortgages “almost disappearing entirely” from the market, there are several better alternatives to stamp duty changes to get the market moving again.

“Throughout other economic crises, stamp duty changes or relief have historically done very little to get the market moving again and there is no reason why it would help this time around either,” Cornerstone founder and principal consultant, David Hannah, commented.

“It has been and still is a poor tool for managing market behaviour. With low-deposit mortgages almost disappearing altogether, people are having to assess their options, but there are some ways that I believe the government could help first steppers.

“To help these people get on the property ladder, government-backed purchase mortgage guarantees for borrowers would be a great way to reinstall confidence in the lending market. This could also help banks regain confidence in mortgage lending.

“If the term of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security again, help buyers, and get the market moving again.

“Other stimuli such as an extension of Help to Buy would almost certainly help but reinstating 95% mortgages is almost essential in helping turn renters into buyers. Guaranteeing their borrowing for the mid-term will give lenders the confidence to bring these products back and restart the market.”

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