LSE academics become the latest to call for Stamp Duty to be scrapped

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.

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2 Comments

  1. NickTurner

    Stamp Duty changes rather like the proposals to do away with charges to prospective tenants for vetting etc show sadly a complete lack of understanding by the Government of the subject matter on which they are prescribing changes.

    It does seem to me that the higher up the food chain the politicians go the more remote from day to day life they become. What I call the London Centric lifestyle takes over, also populated by many journalists and other media pundits who quickly believe that the lifestyle they work and live in is reality. London Centric is NOT reality.

    Within the UK and our particular love affair with owning property the Government should encourage the sale and purchase of property. What they seem to forget is the spin off from a house purchase. New house =new kitchen= new bathroom = new carpets= decoration=new soft furnishings= garden re planned ( and many many other items ) = a shed load of VAT for the Chancellor not forgetting the jobs that a house purchase creates for all the suppy chain companies, locally and nationally.

    A fairer way of  charging  stamp duty should be put in place and the profession should be asked for its views and those views listened to and acted upon.

    An important aside is that why not take at least 20% of Stamp Duty paid and ring fence it to the geographical area in which it was created to provide local authorities the finance to provide housing for local needs. If the money for a particular area is not spent after say 3 years then that money is redistributed to a much more needy area

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  2. claris

    And politicians wonder why the public does not engage with them. They want the votes but are clueless about the real world.

    They say we get the leaders we deserve – I’m not sure what we have done wrong (worldwide), to end up with this idiotic bunch.

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