Mini-budget 2022: Industry reacts to Liz Truss stamp duty cut

Industry experts have responded to the 2022 mini-budget which will see stamp duty cut under plans to tackle the cost-of-living crisis and boost the economy

Plans to tackle the cost-of-living crisis, cut tax and boost the economy have been set out today (23 September) by Chancellor of the Exchequer Kwasi Kwarteng in a new mini-budget. A change of stamp duty tax is among the measures announced.

Under plans by the previous prime minister, Boris Johnson, stamp duty tax was set to be increased from 19% to 25% in April 2023. However, today PM Liz Truss and her government reversed these plans.

How will the stamp duty cut work?

For the first £250,000 of a property’s value, no stamp duty tax will be paid – this is double the current amount.

The threshold for first-time buyers will be increased from £350,000 to £425,000. The value on which first-time buyers can claim relief will also go up to £650,000 from £500,000.

Following the announcement industry experts have voiced their opinions about the move.

Stamp duty cut will support first-time buyers

Stuart Law, CEO of the Assetz Group, said: “An SDLT cut will undoubtedly support many first-time buyers and buyers on lower incomes, granting more people access to the housing ladder by offsetting increasing mortgage rates and rising house prices. But, an SDLT cut is going to stimulate demand further at a time when it is already vastly outstripping supply and that’s only going to send prices one way.

Graham Harle CEO of Gleeds responds to the Chancellor’s ‘mini budget’:

“The government has gambled on growth and if this brings confidence to those operating in our sector then it is good news, but I remain to be convinced with much of the detail yet to be revealed. The announcement on investment zones and cuts in stamp duty is to be welcomed.

“However, many of the planned tax cuts are merely a continuation of current policy or a reversion to where we were last year – the corporation tax rise they have reversed is not even in force yet, and National Insurance only rose in July. So how will more of the same bring about change and boost growth?

“Energy, materials, and labour are the main challenges for our sector, and as far as those operating in it are concerned this is a sticking plaster budget when the patient needed major surgery.

“We needed to see investment in retrofitting existing buildings as a long-term aim to save energy, more tax breaks for training, and relaxation of immigration rules for specialist trades to help expand an industry that is approaching 250,000 vacancies.

“I appreciate that this was only a holding statement from a new government, but I don’t believe it will inject the confidence we need.  Ironically, with sterling recently at a 37-year low, there has never been a better time for foreign capital to invest in Britain.”

Stamp duty cuts will not solve the issue of affordability

Iain McKenzie, CEO of The Guild of Property Professionals, says: “Rising inflation, interest rate hikes and the cost-of-living crisis have taken their toll on the economy and the new chancellor is betting on tax cuts to stimulate growth.

“This mini-Budget comes after the Bank of England announced that Britain was now in recession, so the Government has once again turned to the housing market to become a catalyst for economic growth.

“The cut to Stamp Duty announced today will be welcomed by people currently buying a house, but this will not solve the wider issue of affordability in the property market.

“As we saw during the pandemic when you create incentives to buy, you see demand soar. As demand increases, the number of available properties falls, pushing house prices up. An increase in demand now would come at a time when the supply of housing is already low, with house prices already inflated beyond the budgets of many buyers.

“The housing market is intrinsically tied to the health of the economy. Home-movers spend an average of £12 billion a year on home-related purchases such as furnishings and renovation. Moving can benefit other aspects of the economy, so it is good to see action taken to energise the property market.

“The Government needs to address the issue of housing supply by making home-building a priority. The review on planning systems for infrastructure announced today could go some way towards easing the supply issue, but it relies on the Chancellor’s pledge to ‘get Britain building’.”

A cut in stamp duty during the pandemic put extreme upward pressure on prices

Gregory Dewerpe, founder and chief investment officer at 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.

“As winter approaches, the world is facing a climate crisis, energy prices are at eye-watering levels, and the UK has the oldest housing stock in Europe. We shouldn’t be making it easier to buy a house, but making 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.”

Resorting to stamp duty cuts would be taking the path well worn

Pete Ladhams, managinging director of Assael Architecture, said:

“Truss’ government must be laser-focused on increasing housing stock over short-term stimulus to prop up growth. 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.”

A stamp duty cut risks worsening housing affordability

Avinav Nigam, cofounder and COO at IMMO, says: “A stamp duty cut at this time risks worsening housing affordability even further by 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.

“More so, this tax cut does not help the millions of private renters who are struggling to pay their bills, and 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.”

“The new UK government is aiming for growth by a thousand tax cuts, but there is an argument that the budget should have been looking to stimulate the economy through investment on the supply side that would make us resilient to similar future shocks, such as funding a mass retrofitting programme in housing.”

Stamp duty cuts are only a short-term economic boost

In response to the proposed Liz Truss stamp duty cuts, Robin Paterson, partner at ibuyer Upstix, said: “The proposed stamp duty cuts are certainly one way to provide a short-term economic boost, but there needs to be more clarity on the terms of any deal.

“The timing of the cuts will be crucial. It cannot wait until the new year, given that the entire market – which is already an uncertain one -will be paralysed by prospective buyers waiting for their discount.”

A cut to stamp duty with no plans to increase supply will create more unsustainable house price rises

Gary Wright, co-CEO of payment technology firm flatfair, said:

“Increasing demand through cuts to stamp duty, while having no meaningful plans to increase supply, is a recipe for yet more unsustainable house price rises. The pandemic proved this.

“Overvalued homes do not equal economic growth anywhere except on paper. The effects won’t be felt in wider society. If this government is serious about sharing the benefits of a high-growth economy, it would do well to mitigate the impact of the cost of living crisis on renters, who are often the most vulnerable in society. Reforming the tenancy deposit system to incorporate more than just a punishing traditional five-week deposit – which averages more than £2200 in London – would be a good start.”

Stamp duty cut will make entry to the housing market ever more unaffordable

Edward Heaton, founder and managing partner of Heaton and Partners commented:

“I have mixed feelings about the stamp duty cut given our business stands to benefit from these measures which will help fuel demand in an already highly competitive market, especially outside London.

“The extensions to the nil rate band will be welcomed by first-time buyers and for those acquiring lower value properties especially, but I can’t help feel the result will just be to shore up demand as we head towards a recession. It may also fuel inflation and it will ultimately make entry to the housing market ever more unaffordable for first-time buyers when combined with increasing interest rates.

“As someone who can remember when stamp duty was a flat 1% across the board, I have never welcomed the steady increase in rates over the last three decades. The UK has now one of the highest rates of stamp duty for high-value property in the world, all of which discourages mobility in the housing market. The increases announced today are understandably populist and unsurprisingly do nothing to help wealthier buyers.

“Sadly the mini-budget also did nothing to address the war on second home owners and international buyers with punitive rates imposed on both. I do not believe this is healthy, especially given many areas rely on tourists to fuel their economy. I also think in a post-Brexit world the UK should be doing all it can to help make us an attractive destination to foreign money and that should include their ability to buy property without being unduly penalised.

“Whilst I believe the recent house price increases outside London are probably sustainable, the stamp duty cuts announced today will definitely increase the chances of creating a bubble which may then burst at some stage.”

The Chancellor is borrowing from the Rishi Sunak playbook

Nathan Reilly, director of customer relationships at Twenty7tec says of today’s stamp duty announcement:

“By cutting stamp duty to energise the housing market, the Chancellor is borrowing from the Rishi Sunak playbook. When we saw this in 2021, we had incredible volumes of new business in the housing sector, and some of the busiest times in living history for mortgage advisers and lenders.

“The context is clearly different this time – with a different macroeconomic picture for both interest rates and inflation – but Kwarteng and Truss will be hoping that the house buying market can play a major role in the UK’s near-term economic growth.

“The mortgage market is currently increasingly reliant on the remortgage market, and a stamp duty change is likely to rebalance this back towards a purchase-driven market again.”

Cutting stamp duty is a welcome move says SPPARC

Trevor Morriss, principal at architecture studio SPPARC, said:

“Cutting stamp duty is a welcome move for those at either end of the housing market, whether you are a first-time buyer struggling to put your first foot on the housing ladder or a homeowner looking to downsize. At a time when housing supply is shockingly low, the policy must serve to make the availability of housing of all types and tenures more fluid for all demographics.

“The fly in the ointment is that stamp duty will always be a sticking plaster placed over the failure to address an imbalance of demand and supply. Discarding the 300,000 homes-per-year targets set by previous governments will only widen the gap between the haves and the have-nots.”

The LPDF welcomes the statement of the Chancellor of the Exchequer

“The LPDF welcomes the statement of the Chancellor of the Exchequer made this morning and the emphasis that this Government is now placing on both economic growth and supply-side reforms.

“Whilst the Federation welcomes the stamp duty cuts that will largely benefit first-time buyers we have believed for many years that addressing the issue of housing affordability, increasing home ownership and delivering affordable housing was only ever going to be dealt with through meaningful supply-side reform to enable the planning system to deliver the homes that this country so desperately needs.”