Kemi Badenoch Proposes Stamp Duty Abolition to Boost Housing Market

Kemi Badenoch, the leader of the Conservative Party, has announced plans to abolish stamp duty on residential properties if her party regains power. She claims this measure will “free up our housing market” and create a “fairer and more aspirational society.” The proposed changes aim to alleviate financial burdens on homebuyers by eliminating the tax, which varies based on the property value and whether it is the buyer’s primary residence.

Stamp duty is a tax imposed when purchasing a property, and while it affects the majority of homeowners, the proposed reform would only impact primary residences. Badenoch emphasized the need to make housing more accessible, stating, “We must free up our housing market, because a society where no one can afford to buy or move is a society where social mobility is dead.”

Understanding Stamp Duty and Its Impact

Currently, approximately four in five homeowners in England and Northern Ireland pay stamp duty, with two in five first-time buyers also facing this cost. Different regulations apply in Scotland and Wales. The tax is structured in increasing rates based on the property’s value. For instance, first-time buyers only begin paying stamp duty on the portion of a home priced over £300,000, provided the total value does not exceed £500,000. An additional surcharge of 5 percent applies for purchases of homes that are not the buyer’s primary residence.

Badenoch’s plans would not affect these secondary properties, focusing solely on primary residences.

Areas Poised to Benefit from Abolition

Regions with higher property values would see the most significant savings from the proposed abolition of stamp duty. According to analysis by estate agency Savills, Londoners currently face the highest average stamp duty bill of £32,208. Following London, the South East and East of England have average bills of £12,393 and £9,069, respectively. In contrast, the North East has the lowest average bill at £2,923.

Experts caution that the potential savings from abolishing stamp duty might be reflected in increased house prices. Lucian Cook, head of residential research at Savills, stated, “If, and this is a big if, it is a simple tax giveaway, the likelihood is that the current stamp duty bill simply passes through into house prices.” He estimates that this could lead to an increase in house prices by approximately 1.4 percent to 2.1 percent, equating to between £5,100 and £7,500, depending on the implementation of the policy.

Nevertheless, buyers, particularly those using mortgages, could still experience some financial relief. Since stamp duty is paid upfront, any increase in property prices would be amortized over the mortgage term, allowing buyers to spread the cost over several years.

As the Conservative Party prepares for the upcoming elections, the proposed abolition of stamp duty represents a significant aspect of its housing policy, aiming to rejuvenate the housing market and improve accessibility for prospective homeowners.