How to push up house prices in London

The Chancellor has announced a cut in stamp duty for most people in yesterday’s autumn statement, claiming it will help first-time buyers. Labour’s shadow chancellor quickly supported him, adding that it will “help people on middle and low incomes who are moving homes”.

Given the extremely high prices in London, you sounds like great news! But it could actually make things worse. Let me explain with an example from Anerley.


Imagine you were a rich enough first-time buyer to go for the average two bed flat in SE20, which according to Nestoria costs £329,000! You’ll now have to pay just over £3,000 less in stamp duty to buy it, which will be welcome news.

But this means you, and every other buyer, now has £3,000 more to bid on the price for the home. The Government’s own economists – the Office for Budget Responsibility – say this will push up house prices. Using Shelter’s estimates as my guide, I’ve estimated that this could mean that two bed flat rising to £335,000, so the stamp duty cut will add another £6,000 to the price.

Now in the short run, this might make it slightly easier for you because stamp duty usually eats into the savings you need for a deposit, while that extra £6k on the house price can be spread over the lifetime of your mortgage.

But over time, all of these policies to “help” first-time buyers with tax cuts and subsidies just push prices up.

That could also make life harder for tenants, who are in the majority in the Lewisham West & Penge constituency and yet got nothing at all out of the autumn statement.

What if the Chancellor had spent his time in office trying to keep house prices stable?

se20-pricesUsing Nestoria’s figures again, you’d stand to pay less than £200,000 for a two bed flat if prices hadn’t risen since 2011.

You can see the incredible – appalling even – rise in house prices in SE20 in the chart on the right.

Under the old stamp duty rules you’d pay something like £2,000 in tax to buy that two bed flat, which is almost £5,000 less than you now have to pay with the new stamp duty rules on the much more expensive flat.

You’d also have to save a much smaller deposit, and pay smaller monthly costs!

We can stabilise prices

Rising house prices aren’t inevitable, they are a political choice that successive governments have made for decades.

House prices have been going up because of flawed policies like this change to stamp duty, and because we aren’t building enough homes, and because the ones we do build in London are mostly bought up by investors speculating on rising prices. I’ve been told by a number of estate agents around Crystal Palace that buy-to-let investors are quite willing to put in silly bids because they think prices will only rise. It’s a self-fulfilling prophecy, and property speculation from all over the world is keeping the London bubble inflated.

So instead of fiddling with stamp duty, the Green Party would replace it with a Land Value Tax, which would take out most of the profit from this speculation and so stop them even trying to buy, leaving people who actually want to live in the homes to bid at prices they can afford. It would make taxes on property – including council tax – much fairer, and focus our minds on housing as a home instead of an asset.

Instead of short-term gimmicks, it would help us to bear down on house prices in the long run.

This policy – along with others like rent controls and a big social housing programme – will be fully unveiled in the Green Party manifesto next year, laying the foundations to fix this housing crisis within a generation.