High stamp duty lowers house prices

A new paper from IZA confirms: it's sellers who really pay stamp duty.

Stamp duty is one of the most hated taxes in the country. That's partially because it's for large amounts, levied all at once: it hurts a lot more to hand over £8000 in one lump sum than it does to have it taken from you over the course of a year. It's also because it is a tax which is broken at a very fundamental level. Unlike nearly every other tax, stamp duty (technically called Stamp Duty Land Tax, SDLT) is valued at a percentage of the total value of the house, with the percentage increasing as the value increases. That leads to some very strange effects on the housing market as people revalue their houses to avoid hitting the thresholds:

In this chart, from Savills, you can see the effect of the stamp duty thresholds at £125,000, £250,000 and £500,000.

But stamp duty is also hated because it raises the cost of moving house. The tax is payable by the buyer of the property, making it seem particularly painful for first-time buyers, who don't have the cash from selling a previous residence to provide the necessary liquidity.

But, as we know from other debates, who pays a tax isn't always as clear as it seems. The classic example is the employer's contribution to national insurance: they pay tax on 13.8 per cent of their employee's earnings, but there's evidence to suggest that if that tax did not exist, it would lead to higher wages, not higher profits. So is the same true for stamp duty?

Chris Dillow points to a paper published by the Institute for the Study of Labor (IZA – the institute is German) suggests it is. The authors, the IMF's Ian Davidoff and IZA's Andrew Leigh, write that:

The short-term impact of a 10 per cent increase in the stamp duty is to lower house prices by 3 per cent… Since stamp duty averages only 2-4 per cent of the value of the property, these results imply that the economic incidence of the tax is entirely on the seller; that is, prices fall by the full amount of the tax.

The data is for the Australian market, but sits comfortably with snapshots like the Savills graph above, which show that, at least at the thresholds, sellers are extraordinarily sensitive to the cost of stamp duty. There's few for whom that's good news – though if you don't yet own a house and plan to buy one and never sell it, it won't hurt.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.