The UK’s estate agents called for cuts to stamp duty to help younger buyers today as official figures showed house price growth slowing to a five-year low of 3 per cent.
The Royal Institution of Chartered Surveyors argued for an overhaul of property taxation after a survey of its members showed that they felt homeowners were put off downsizing by the costs involved, which is clogging up the property market.
Meanwhile, house price growth across the UK is still averaging above the rate of general inflation: the Office for National Statistics said today that while property rose in price by 3 per cent between last July and this July, the rate of consumer inflation is running at 2.7 per cent.
The rate of house price growth fell to a five-year low in July, said the ONS.
But house prices are still on an upward trajectory, having risen fairly consistently since the end of the financial crisis.
The ONS said that that is the lowest annual growth rate since August 2013, and the figure was held back again by falls in London, where property prices fell 0.7 per cent.
The capital’s stock of flats has been hit in particular by Brexit worries, and that category of home has suffered the slowest average price growth inthe last couple of years.
Sam Mitchell of online estate agents Housesimple said that London is firmly a buyers’ market at the moment, ‘with heavy price discounting the norm’.
‘There is a new reality in the capital that sellers are having to come to terms with,’ he added.
‘Prices are down on last year, and sellers have found it difficult to adjust to these price adjustments. Having enjoyed strong price growth for a decade it’s easy to become complacent and assume this upward trajectory will continue unabated.
‘Many of the transactions going through at the moment are down to sellers accepting offers a fair bit below the asking price. Sellers and agents need to adjust their price expectations if they want to attract buyers.’
The capital was the only region to see house prices fall, the ONS data showed.
Former Rics boss and London estate agent Jeremy Leaf noted that while estate agents are now seeing an autumn increase in properties coming to the market ‘it is still hard to gain commitment from buyers because property needs to differentiate itself from the competition in order to attract interest and offers’.
‘Looking forward we are not expecting to see any significant changes or huge movements one way or the other as the market settles down for the rest of the year in a similar pattern.’
A lack of supply of housing is widely blamed for continual increases in house prices despite dire affordability issues for first-time buyers and many households looking to trade up.
Director at Legal & General Mortgage Club Kevin Roberts said that, ‘A lack of appropriate housing stock is creating a bottleneck in the market. It’s limiting options available to those looking to take their first or next step onto the ladder, as well as squeezing affordability.’
Flats are faring worse than other homes as expensive apartment stock in London has taken a hit.
Part of this supply bottleneck is caused by existing homeowners not moving and Rics argues that this is often because they don’t want to hand over tens of thousands of pounds in stamp duty.
Making it easier for people to downsize from larger family homes to smaller properties would benefit the whole housing chain, Rics said, bringing more second-hand properties onto the market and helping to tackle housing shortages.
Some changes have been made to stamp duty in recent years – including in 2017 scrapping the tax for first-time buyers purchasing homes for up to £300,000.
Abdul Choudhury, Rics policy manager, said: ‘It is not surprising that our professionals feel that residential property taxation is out of kilter.’
He said stamp duty ‘makes purchasing, moving and making more effective use of stock costly at a time when we need all these things.
‘Council taxes, on the other hand, are woefully out-of-date and are highly politicised.’
He continued: ‘Given the state of the housing market, it would be prudent for the Government to consider the cumulative impact current taxes are having on behaviour and determine what changes can create a more sustainable and vibrant property sector.
‘We would therefore urge the Government to undertake a full-scale review of the SDLT (stamp duty land tax) system – starting with what it hopes to achieve from this tax in terms of revenue generation, market fluidity or another objective.’
A Treasury spokesman said: ‘We want to restore the dream of home ownership 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.’