How the stamp duty holiday is pushing up house prices
Stamp duty is an awful tax and should be replaced by something better. But its temporary removal is driving up house prices, says Merryn Somerset Webb.


An irritated tweet from a reader. He lives in Scotland, had just bought a house and, thanks to Scotland not slashing stamp duty on house purchases in the same way as England had (no tax is payable on purchases up to a price of £500,000 in England vs £250,000 in Scotland), he said, just paid tens of thousands more to get his house than he would have had he been in the UK. I can see how that would be totally maddening.
But here’s the question – had he really paid more than he would have in the rest of the UK? I suspect not. Because, in the end, houses sell for as much as buyers are able to pay – and if they aren’t paying stamp duty, they can pay more in total for the house itself.
It might be buyers that have to actually hand over the stamp duty cash to the state, but it is the seller who tends to be affected by its level. When stamp duty goes up they sell for less; when stamp duty goes down they sell for more. This is not an exact science, but it is not hard to see in the numbers either.
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The stamp duty cut came into effect in July. By the second week of August, the papers were reporting exactly what you would have expected: there was, as The Times put it, a “surge in the number of homebuyers, leading to bidding wars and the number of homes being sold over the asking price reaching record levels.”
There was a 45% rise in first-time buyers, and various estate agencies reported inquiries up by 30%-40%. The number of buy to let investors looking rose by 28% and of second home buyers by 22%.
You can see this same kind of dynamic working in the Help to Buy scheme as well. State attempts to subsidise the house purchases of the young simply push up the total amount they are able to pay – and do pay. Most research suggests that Help to Buy purchasers end up paying 5% to 8% more than ordinary buyers of new-build houses, something that has long allowed builders to keep their prices up while maintaining their glorious record of delivering generally shoddy products. Nice.
I think stamp duty is an awful tax. It gums up the housing market, it penalises those without well-off parents (if you need to pay a deposit and your stamp in cash saved out of earned income, you have an awful lot of saving to do); and it should be replaced by CGT on primary homes. But that doesn’t mean removing it will always make the final price of a house cheaper than keeping it.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
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