Saga, an insurance and holiday provider for the over 50s, has today (April 7) called on the government to allow one stamp duty-free move for those choosing to downsize in retirement.
A survey of 2,000 people, conducted in February of this year, showed that 70 per cent of potential downsizers were keen to move as their current home was too large.
On top of this, nearly three quarters of over 50s supported the one stamp duty-free move, according to a poll of Saga members also conducted in February.
Saga stated that with the current shortage of housing across the UK, downsizing could be part of the solution to help free-up housing for families and those looking to climb up the property ladder.
In another member poll conducted by Saga in April, nearly half of those over 50 said they would consider downsizing as an option to help fund their retirement.
In the 2019 Spring Statement, the Treasury stated the removal of stamp duty for first-time buyers had helped about 240,000 people get onto the property ladder for the first time.
According to Saga a similar break for those who are downsizing could have a multitude of benefits which include the release of homes onto the market.
Jeff Bromage, managing director at Saga Money, said: "For many years we have been calling for stamp duty-free breaks to increase liquidity in the market. It was great that the government acted to help first-time buyers, but this is only part of the solution.
"More needs to be done to help free up more family homes to the market in order to continue the supply of first homes. A large proportion of our members have told us that they would like to move to a smaller home so they can release money from their homes – either for themselves or to give to their families – but the costs associated with doing so are preventing them.
"With nearly three quarters of the over 50s supporting this stamp duty break, and with this figure continuing to rise year on year, we are urging the government to reconsider this exemption – to support potential downsizers, their families and the wider housing market."
John Phillips, group operations director at Just Mortgages and Spicerhaart, agreed with the need for a stamp duty break.
He said: "There is a lot of criticism of older people taking up all the ‘family homes’. But when you consider that an older couple can’t buy a smaller property without spending a huge amount of money on stamp duty, but can stay where they are for nothing, why would they move if it’s cheaper to stay put?
"Stamp duty brings in around £8bn a year to the government’s coffers – sounds an awful lot, but when you consider the government gets more than five times as much from duties of whisky, cigarettes and petrol, and it puts things into perspective."
Mr Phillips added there are knock-on costs to consider such as pressure to health and social services from people put off moving because of stamp duty, who are remaining in homes that may be unsuitable for their needs.
He said: "The government has made a start by cutting stamp duty for first-time buyers, but what about the rest of the chain? By only cutting tax for first-time buyers, ultimately all that is going to happen is that first-time buyer property prices will be forced up as sellers try and add the money ‘saved’ onto asking prices, to help them cover their own stamp duty costs.
"Everyone knows that if the housing market slows, so does the whole economy. If people aren’t buying new houses, they are not buying new furniture, fridges or freezers, they are not having kitchens or bathrooms refitted or spending money of decorating.
"Stamp duty is stifling the market and needs a huge overhaul. Ideally, it would be abolished altogether, but cutting it for downsizers would be a good start."
The stamp duty regime was overhauled in 2014, making it costlier for people with higher value homes and free for those with homes worth less than £125,000.
At the time chancellor George Osborne said the new bands would cut the rate of tax for 98 per cent of house purchases, and raise more money from those buying the most expensive homes.
First-time buyers in England and Northern Ireland also pay no stamp duty on properties worth up to £300,000.
A HM Treasury spokesperson said: "We want to restore the dream of homeownership for a new generation. Our stamp duty relief for first-time buyers will help over a million people get onto the housing ladder over the next five years.
"There are lots of reasons why people do not downsize, including personal attachment to their home. Transaction costs are often only one of many considerations."
imogen.tew@ft.com
