The Conservatives’ surprise proposal to scrap Stamp Duty altogether could, paradoxically, bring the housing market to a standstill in the run-up to the next General Election.

That’s the warning from Tom Bill, head of residential research at Knight Frank, who believes the policy could backfire if the Conservatives were ahead in the polls. In that scenario, many would-be sellers and buyers might delay moving until after the election, hoping to take advantage of the tax being abolished if the Tories won.

However, Bill says that if the policy were ever implemented — which depends entirely on a Conservative victory, likely in 2029 — it would have an immediate and dramatic effect on market activity.

Calls for a Reality Check

Jeremy Leaf, former RICS residential chairman, shares some enthusiasm for reforming Stamp Duty but urges caution.  “Be careful what you wish for. The revenue generated by this hugely unpopular tax will have to be replaced – but there must be a better way. We certainly need an urgent debate to determine what alternative is going to have least impact on activity.”

“An Albatross, Not a Rabbit”

Others are far less convinced. Stuart Cheetham, chief executive of mortgage lender MPowered, called the idea “a rabbit out of the hat” moment that could haunt the Conservatives if they win.

“Promising to forego billions in tax revenue is bold stuff, and one of the few privileges enjoyed by opposition parties. No party currently in office would dare give away so much revenue, given the weakness of the Government’s finances.

“Scrapping Stamp Duty entirely would be very popular, and it would deliver a huge caffeine jolt to the sluggish property market. But there’s also a risk that it would drive up prices so fast that any savings for first-time buyers would soon be cancelled out.”

Cheetham also points out that the biggest beneficiaries of full abolition would be wealthier buyers, not first-timers: “People buying a second home or very expensive properties would save the most tax.

First-time buyers currently pay no Stamp Duty on properties costing less than £300,000 – and the changes would do nothing for them. Kemi Badenoch’s announcement will fly when it comes to headlines, but on every other count it’s unlikely to get off the ground.”

Impact Depends on What Comes Next

Lucian Cook, head of residential research at Savills, notes that residential property transactions currently generate £10.4 billion for the Treasury — meaning what replaces the tax will matter as much as the abolition itself.

If nothing replaces Stamp Duty, Cook estimates that prices could rise by around 2.8%, equivalent to roughly £9,700 on average. But the effect would vary widely across the country.

“It is difficult to model what it would do to transactions, but it should free up activity, especially among the groups that bear the biggest exposure to taxes.

With the reliefs already available, it would have the least impact on first-time buyer numbers, with much bigger impacts on mortgaged home buyers and downsizers.

The extent to which it increases activity among buy-to-let investors or second-home owners really depends on whether the surcharges on these purchases are retained or replaced.”

Average Stamp Duty Bill (2021/22–2023/24)