A financial institution chief says exempting mature ‘downsizers’ from stamp duty will stimulate the wider housing market, writes KEN HOUSTON
They live, mortgage-free, in their own homes that have undergone huge increases in value over several decades. Their income from the state is guaranteed by the government to increase year on year. They can travel by air-conditioned coach from Wick to Wigton or Skye to Selkirk, without paying a penny.
So who in their right mind – other than members of wrinkly pressure groups – believes that the 65’s and over should become exempt from paying stamp duty (in Scotland officially the Land and Buildings Transaction Tax) when they move house?
Nigel Wilson does.
The chief executive of Legal & General is all in favour of a stamp duty holiday for older people, just so long as they are downsizing – or ‘right sizing’ as he would describe it.
According to a survey by L&G, one in three owner occupiers over the age of 55 has considered downsizing in the past five years but only 7 per cent have done so.
Mr Wilson believes that making this age group exempt from stamp duty is just what is needed to encourage more to take the plunge and by doing so freeing up larger houses (and consequently more bedrooms) for growing families of a younger generation, which in turn will increase activity at the middle and lower ends of the market.
Critics may scoff at yet another concession to the grey vote (whom George Osborne has been shamelessly courting in the past two years) but Mr Wilson does seem to have a point.
It is all very well saying that many pensioners are mortgage-free and that downsizing will provide them with a substantial surplus, however there is an important psychological element to consider.
Families trading up are not only moving to superior accommodation but with each move the asset they purchase is all the more valuable than the previous one. Downsizers are moving in the opposite direction – realising cash, yes, but switching a high-value asset for a lower-value one. The situation is compounded by the fact that many mature sellers will see this as the ‘last move’ (before the dreaded nursing home, if applicable) and something they will have only one chance to get right. So they hesitate (surely one major reason why 33.3pc of over-55’s considered downsizing but only 7pc did so).
There are also practical reasons for the reluctance to downsize. Let’s take a recently-retired couple who continue to live in a large, detached family home, in a prime location, despite their children having reached adulthood and flown the nest perhaps a decade earlier.
Let’s assume this property is worth £850,000 (and before criticising them as undeserving toffs, also assume they came from modest backgrounds, started off in a tenement flat 40 years earlier and had managed to trade up in stages over that period through hard work and endeavour).
If this couple wanted to downsize, their choice could very well be a spacious, new-build flat in the same neighbourhood, cheaper to run and much more manageable than their present home. This flat might cost in the region of £500,000, potentially giving them a cash surplus of £350,000 (after legal and other expenses).
Well, no it wouldn’t.
Because the stamp duty on a £500,000 purchase would be levied at 10pc, in monetary terms a whacking £50,000. Now that might not be a deterrent to a young, well-remunerated executive being fast-tracked to a top job but it could be rather daunting for someone who is now retired and even though comfortably off, will have memories of how hyperinflation in the mid-1970’s threatened to destroy the living standards of many ‘comfortable’ pensioners had it lasted much longer.
Mr Wilson sees a stamp duty exemption for older downsizers as being revenue-neutral for the government because, by stimulating the wider market (by buyers lower down the chain trading up) there would be no overall loss in the value of tax receipts.
I suspect Mr Wilson’s comments are geared towards Westminster but the issue is even more relevant to Holyrood because LBTT is more onerous for those in the middle- to upper-sections in Scotland than stamp duty is in England.
But if George Osborne isn’t listening, I’m fairly sure that John Swinney isn’t either!
As I write Greece is teetering at the very edge of the Eurozone cliff; will she fall off by the time this article is uploaded; who knows?
What seems certain is that whatever the outcome, the rest of the Eurozone will have to take a ‘haircut’ (to use the current euphemism for writing off bad debt incurred by a national government).
That ‘haircut’ is likely to be less if Greece leaves the Eurozone rather than stays in for the latter scenario would suggest a long period of simply propping up the Greek economy, with no practical end in sight.
So why are the Europhiles still so keen to keep Greece inside the tent?
I give you one possibility – after leaving the Eurozone, austerity in Greece gets even worse than it currently is and there is a real danger of civil unrest. But this period is relatively short, because for the reinstated drachma, the only way is up.
The currency then finds its normal market level, low-cost Greece becomes attractive to investors, tourism booms and the wider economy starts to revive.
Italy, Spain and Portugal then look to Greece and ask themselves, ‘why are we saddled with a currency over which our government has no control and is clearly overvalued in terms of our industrial output and business culture?’
And: ‘Why does the European economic powerhouse, Germany, trade in a currency that is clearly undervalued in terms of that country’s industrial output and business culture?’
And finally: ‘Why the hell are we continuing to stick with the euro and not returning to the lira/peseta/escudo?’
And for the European arch-integrationists, who saw the euro as the first big step in a wider plan, this outcome is a complete no-no.