Housing is back at the centre of the political conversation following a long period when wider economic challenges overshadowed the issue.
The prime minister's conference speech marked this significant policy shift with the announcement of ‘Your First Home’, a version of the previous Help to Buy scheme. More details of the new offering will be unveiled in the Budget on October 28. It will help first-time buyers who meet income and other criteria to acquire a new-build property with a deposit as low as 2.5%.
Potential beneficiaries of Your First Home will be listening closely to the Chancellor's speech. But he can also expect close attention from homeowners in London and the South, concerned by rumours that the threshold for the High Value Council Tax Surcharge - 'the Mansion Tax' - could be lowered from £2 million to £1.5 million. Speculation that the government may make such a move has added to uncertainty in prime markets since it would double the number of properties subject to the levy. Even if no alteration is made, households may assume that the mansion tax's scope will be extended in some way or another in future.
Against this background, the tension between government and homeowners is mounting. Policymakers want more transactions, more housebuilding and easier access to homeownership. But a large number of people who can afford to move and thus reignite activity are being held back by high taxation today and fears of what might come in the future.
...the government’s challenge is to rebuild confidence, get more people buying and selling homes, and raise housing supply, while the wider debate over how property should be taxed continues.
More debate about the structure of property taxation is certain. The notion of replacing stamp duty and council tax with an annual property or land tax has considerable attractions, particularly if it reduces the upfront cost of moving. The prime minister has said in the past that he supports a land value tax, but moving to this kind of system would be the largest transformation of property taxation in decades.
The process would involve extensive consultation, detailed modelling and a clear transition plan. A general election mandate would also be required for this kind of upheaval.
The practical and political hurdles mean that anyone hoping for stamp duty to be abolished in the near term is likely to be disappointed. A more modest cut would still make a meaningful difference, reducing the upfront cost of moving and helping to unlock transactions. But that looks unlikely for now.
In the meantime, the government’s challenge is to rebuild confidence, get more people buying and selling homes, and raise housing supply, while the wider debate over how property should be taxed continues.
