'Stamp duty cut is not a magic pill for the challenges facing the housing sector'

With buyers having paid a staggering £11.8bn in stamp duty in 2023 and the government designing an election year Budget, the question needs to be asked: should the UK government initiate another stamp duty holiday in 2024 and what would they be trying to achieve?

A stamp duty holiday temporarily reduces or eliminates SDLT for certain property transactions, aiming to stimulate market activity and make homeownership more accessible.

However, although the benefits are enticing, the drawbacks of another stamp duty holiday are stark and must be carefully considered.

On the one hand, a stamp duty holiday could provide a much-needed boost to the lower end of the housing market.

This could benefit first-time buyers by reducing the amount of savings needed to pay the ancillary costs of buying a home, or allowing them to focus their cash into larger deposits, thus improving affordability.

The decision to implement another stamp duty holiday should not be taken lightly.

Additionally, a holiday might also address the supply issues in the rental market by encouraging landlords to expand their portfolios, given the potential removal of the 3 per cent surcharge on properties acquired for private rental sector investment.

On the other hand, a stamp duty holiday might lead to a temporary and artificial inflation in property prices, as witnessed during the previous holiday.

This surge in demand can result in a short-lived bubble, potentially harming long-term market stability and trapping new buyers in negative equity.

Another consideration is the significant revenue loss that would have been generated by stamp duty, as highlighted by the £11.8bn collected in 2023.

A reduction or elimination of this revenue stream could impact other public services or necessitate finding alternative sources of funding.

Another important discussion is needed regarding the ideological intention of a potential SDLT scrapping for landlords.

We must ask ourselves: do we, as a country, want to help landlords make more profit, or do we want to try and help the most number of people possible become homeowners?

There is a finite number of starter homes in the UK and not nearly enough supply being built each year. If we allow discounted purchases to those who already own, are we blocking first-time buyers from ever reaching the first rung on the property ladder?

Given these considerations, the decision to implement another stamp duty holiday should not be taken lightly.

It requires a balanced approach that weighs the short-term stimulus against the long-term health and stability of the housing market.

While a stamp duty holiday could provide immediate relief to some buyers and stimulate certain market segments, its broader implications and potential unintended consequences must be carefully assessed.

While the idea of another stamp duty holiday in 2024 is appealing, particularly for those struggling to enter the property market, and for a government keen to win over younger voters ahead of a general election, it is not a magic pill for all the challenges facing the UK housing sector.

A more holistic approach, encompassing both fiscal measures and broader housing policies, such as house building, is necessary to ensure sustainable growth and affordability in the UK housing market.

Peter Stamford is director and lead adviser at Moor Mortgages