Would Abolishing Stamp Duty Change The Housing Market?

With speculation mounting ahead of the Autumn Budget, one policy has captured the attention of homebuyers, property developers, and mortgage providers alike: abolishing stamp duty on primary residences.

The Conservative Party recently announced plans to scrap the tax entirely on owner-occupied homes (while retaining it for second homes, corporate buyers, and non-UK residents) if they return to power.

Given the scale of such a shift, many in the property finance and real estate sectors are asking: What would be the impact on the housing market? 

In this article, we explore plausible consequences, risks and opportunities and how our property finance division is uniquely placed to help clients navigate the potential changes.

---

Why the Speculation Is So Strong

Before we dive into market effects, it’s worth understanding why this idea has gained traction:

• At the Conservative Party Conference, leader Kemi Badenoch pledged to abolish stamp duty on primary home purchases above £125,000, an estimated annual cost to the Treasury of around £9 billion.

• The Conservatives frame it as a bold move to stimulate the housing market, boost mobility, and make homeownership more accessible. 

• Critics and analysts warn it would primarily benefit higher-value markets (London, Southeast), risk inflating house prices further, and leave a significant hole in public finances. 

• There is conjecture that even if the Conservatives do not implement it, a Labour government might “steal” elements of the plan or introduce alternative property taxes to replace lost revenue.

• The uncertainty is already having real effects: in higher price brackets, buyer demand is softening, and some sellers are holding off listing until tax policy clarity emerges. 

Thus, the timing is right for an informed discussion about how abolishing stamp duty could reshape the property landscape, and how financiers and buyers should prepare.

---

Five Ways Abolishing Stamp Duty Could Alter the Housing Market

Here are five key channels through which the removal of stamp duty might influence supply, demand, pricing, and behaviour in the housing sector:

1. Lower “friction costs” and increased transaction volume

Stamp duty is often cited as a barrier to moving. Removing it could reduce the upfront cost of relocating, downsizing, or upsizing, especially for those bridging between homes. That said, sellers might respond by hiking list prices to capture part of that “savings,” which could blunt the net benefit to buyers.

2. More mobility, especially for older and mid-tier homeowners

Removing stamp duty may encourage older homeowners to downsize (rather than stay put to avoid tax), freeing up larger homes for younger families. It might also ease moves tied to jobs or life changes, improving labour market flexibility.

3. Upward pressure on house prices

A classic concern: increased demand with constrained supply could drive house prices higher, particularly in popular regions. Critics argue this could disproportionately benefit existing owners rather than first-time buyers. In effect, the tax cut could partly be capitalised into existing home values, reducing the “real gain” to buyers.

4. Fiscal trade-offs and substitution effects

Stamp duty currently contributes significantly to public revenue. Scrapping it would require replacement measures, whether cuts to public spending, reforming council tax, or new property taxes or capital gains taxes. Some economists warn that replacing the revenue via more regressive taxes or levies on lower-income households could offset the intended fairness gains.

5. Impact on the rental and investment sector

Because the pledge exempts second homes, corporate purchases, and non-UK buyers, the investor and rental market would still face stamp duty. That asymmetry could shift incentives, potentially discouraging buy-to-let investment in some corridors. This might reduce supply of rental stock or push yields upward, with consequences for affordability in the private rental sector.

---

Risks, Uncertainties, and Market Behaviour

While the above scenarios are plausible, several caveats and uncertainties must be borne in mind:

• Timing and deliverability: The plan depends heavily on convincing the Treasury and public that the lost revenue can be offset. Many analysts remain sceptical about the realism of the proposed spending cuts and substitution taxes.

• Lagged effects: Even if abolished, changes take time to filter through listing, buyer behaviour, and financing decisions. Immediate disruption is unlikely, and markets could over- or under-react in the short term.

• Regional variation: The benefits (and risks) will not be uniform. Hot markets with constrained supply (London, Southeast) may see bigger gains and price inflation. Weaker or oversupplied markets might see less of a boost.

• Behavioural responses: Some buyers may simply absorb the “windfall” rather than accelerate moves, especially if mortgage interest rates or credit conditions remain tight. Others may delay in anticipation of further tax changes or uncertainty.

• Unintended distortions: Removing stamp duty for owner-occupiers but not for investors or non-resident buyers could create weird incentives or distortions in the housing investment landscape.

In short: abolishing stamp duty is no silver bullet. It has powerful theoretical appeal, but its practical outcomes will depend heavily on timing, complementary policy, and market reactions.

---

What This Means for Mortgage & Property Finance (and Why Our Experts Matter)

In an environment of tax policy flux, prudent buying and financing decisions become more important than ever. Here is how a dedicated property finance division (like ours) can help:

• Scenario planning: We can model how price movements, equity requirements, and debt-to-income thresholds may shift under different stamp duty regimes, helping clients assess when/if to act.

• Tailored product matching: Whether you're a first-time buyer, upsizing, or downsizing, our team can suggest mortgage products optimised for changed tax landscapes (e.g. bridging, overpayment flexibility, remortgage options).

• Risk mitigation advice: We guide clients on “timing risk”, e.g. whether to lock in now or wait for budget clarity, and help structure contracts with protective clauses where possible.

• Regional insight: Different regions will respond differently. Our country-wide network allows us to track emerging trends locally (price growth, supply, demand shifts), so clients aren’t caught off guard.

• Capitalising on opportunities: If the market does “kick forward” after abolition, move-intent clients or property investors will need speed and structure. Our team helps clients position capital and lending readiness.

By partnering with our property finance division, clients get not just transactional support, but strategic advice grounded in scenario stress-testing and market insight.