Stamp Duty is having a “substantial detrimental effect” on the housing market, academics have claimed.
A study by the London School of Economics and the VATT Institute for Economic Research found Stamp Duty, or property transfer taxes, were making households less likely to move, particularly over shorter distances.
The report looked at activity for properties worth more than £250,000, where Stamp Duty jumps from 1% to 3%.
The researchers found Stamp Duty had little influence on households moving for “major life events” such as divorce or job related reasons, which may mean moving a long distance.
But issues were identified when it was asked if people moved for “housing related issues”.
The report said: “The transfer tax can make households tolerate larger discrepancies between the characteristics of their actual and the desired dwelling before moving.
“As a result, the match between dwellings and households is on average worse than in the absence of the tax.
“The increased mismatch in the housing market may lead to ‘waste’ in the form of misallocation costs due to, for example, expanding households living in too small houses and shrinking households living in too large houses.”
The report concludes that transfer taxes on residential properties are an inefficient way of collecting tax revenue and suggests levies on land consumption that apply independently of whether a household moves may be better.
It comes as The Daily Telegraph reported that unnamed cabinet ministers have been urging Chancellor Philip Hammond to take action on Stamp Duty.