Former National Association of Estate Agents president Simon Gerrard is renewing his campaign for the government to adopt two innovative reforms to help the market.
As we reported on Estate Agent Today, Gerrard wrote some weeks ago to housing minister Alok Sharma outlining his two proposals - firstly, to switch stamp duty liability from buyers to sellers, and secondly, to have a moratorium on Capital Gains Tax.
However, despite Gerrard's well-known status as an ex-NAEA president, Sharma felt the letter did not justify a direct reply; instead, he passed it to the Treasury.
Gerrard received a reply from the Treasury but felt strongly that it didn't appropriately consider the points being made, and the absence of a reply at all from Sharma meant the points were not being felt where they should have most impact.
Now Gerrard is back on the attack. In a letter seen by Estate Agent Today, he has responded to the Treasury and copying in Chancellor Phillip Hammond, whose Budget next week could be the ideal vehicle for delivering the requested reforms.
Here's Simon Gerrard's letter in full, setting out the arguments that underpin his suggested reforms:
Many thanks for taking the time to respond to my letter that I wrote to our Housing Minister Mr Sharma, in which I outlined two key policies that I, and much of the industry, believe could be transformative in solving many of the problems currently plaguing our housing market.
However, what is clear from your response is that you have failed to properly consider or grasp either of the suggested measures. I am concerned that you do not understand my intended approach to support the housing market, which you claim to be so invested in fixing, so I thought I would elaborate in the hope of engaging with you.
I appreciate that supplying the number of homes needed, and supporting home ownership, is a complex and difficult task that requires the securing of significant funds by the treasury.
However, it is for this reason that the two measures suggested are intended to stimulate activity and encourage healthy market activity without drawing on extensive funds or reducing the overall amount received by the government through taxation. Increased transactional volumes would both boost treasury income and ensure that the property industry continues to act as one of the key pillars of our economy. It is short sighted of you to assume that the positive impact to the economy of increased transactional volumes is limited to stamp duty receipts.
Following receipt of your letter I have also consulted with the Association of Accounting Technicians, to ensure a robust analysis of the available data.
I will first address your feedback regarding my suggestion of switching SDLT liability from the buyer to the seller. This will undoubtedly help first-time buyers get on the ladder (AAT found that the number of first-time buyers paying stamp duty rose over 96% from 2013-2016). It would also assist second steppers, and therefore increase the number of property transactions taking place. You claim that there would be a ‘short to medium term’ loss of revenue and that transitional arrangements would be needed to deal with homeowners facing double taxation. However the fact is that while those paying Stamp Duty will change, the amount will not. The only transitional issue would relate to those obtaining bridging finance to complete a purchase before selling, and there are already transitional arrangements in place in this regard with respect to the 3% additional second home liability. Stamp Duty will remain a multi-billion pound revenue stream. Considering the benefit of an increase in transactions and a greater number of people able to get on the property ladder, this ‘short to medium’ cost of arranging the switch will pay dividends in the long term and is surely worth the limited short-term cost.
In addition I have suggested that this does not apply to those buying second homes, who will continue to pay the 3% second home surcharge at purchase, but rather only those buying first or subsequent family homes that will pay no stamp duty on their purchases. You argue that this will stop people selling – however this happens anyway and has nothing to do with cost, but rather sentimentality. When examining the property chain, downsizers are likely to have minimal mortgage costs and significant equity, therefore are best placed to pay a little extra – certainly more than first time buyers. The London School of Economics and the VATT Institute for Economic Research have said that moving home would increase 27% if the levy was scrapped (August 2017).
The only reason that this change may have a detrimental effect on government income is because of my suggestion that those building new homes would not have to pay when selling, to ensure that house building is still encouraged. I also believe that those over pensionable age with less than £250,000 equity when they sell should not pay stamp duty on their sale. This would protect those with less equity in property and ensure they are still able to afford care in their later years as needed.
Secondly is my suggestion that the Government undertake a temporary CGT moratorium on land sales. This would provide landowners with a much needed push to sell, and bring a huge amount of land to market, allowing desperately needed homes to be built. Your only response was that CGT raises several billion pounds each year and any change would have to be carefully considered. However I was not suggesting a total moratorium on all CGT – only where it relates to the sale of land for development. I would like to ask exactly how much this revenue amounts to? I imagine it is in the realm of hundreds of thousands of pounds, rather than billions. This amount would be far outweighed by the positive impact of multiple new developable plots of land coming to market and enabling much needed homes to be built.
Finally, you mention the ‘significant progress’ that has been made in boosting house supply, with almost 900,000 homes built since 2010. Yet this breaks down to less than 128,000 homes per year – well below the 300,000 target your Government set as the level needed to meet demand. If my team were only hitting 40% of their target, I would not be declaring it a success, but rather looking into drastic measures on how to bring that up to speed. Simply put, it is not enough.
I am also very disappointed that Mr Sharma did not feel that my letter warranted a direct reply, and that he appears to be hiding or altogether disinterested in the housing market. As you are aware I am past-President of the National Association of Estate Agents (NAEA Propertymark), and am more than aware of the market dynamics that have governed the industry for the last two decades. He should be taking the time to consider such measures, not avoiding engagement altogether.
Your letter, while well-intentioned, shows a failure to adequately grasp and consider my policy suggestions. I intend to share my original letter, your response, and this letter with both the Chancellor of the Exchequer, Mr Phillip Hammond, and the Secretary of State for Communities and Local Government, Mr Sajid Javid.
I would welcome the chance to discuss this matter in person, as a means of ensuring you understand the policy suggestions and their positive potential impact on the property market. I would also welcome the opportunity to discuss any unintended consequences that you, your team or the Government feel that I may have overlooked.
I look forward to hearing your thoughts.
Mr Simon Gerrard
MD, Martyn Gerrard Estate Agents