Would Abolishing Stamp Duty Really Help Young Homebuyers — or Just Push Up House Prices?

10th October 2025

When Business Secretary Kemi Badenoch announced her intention to abolish stamp duty, it was framed as a bold gesture to help young people get onto the housing ladder.

The argument is simple and appealing - remove a tax that adds thousands to the upfront cost of buying a home, and ownership will become more attainable. But the reality is far less straightforward.

While the proposal would reduce the cash required at the point of purchase, it would almost certainly drive up house prices, leaving young and first-time buyers no better off and possibly worse.

Stamp Duty Land Tax is paid by buyers when purchasing property, and it rises in bands according to price. The first £250,000 is tax-free, with higher rates applied above that threshold.

It must be paid in cash, not through a mortgage, which makes it one of the biggest obstacles for younger buyers trying to scrape together a deposit. For that reason, abolishing it sounds like a lifeline. Yet history shows that when transaction taxes are removed in a market with tight supply, the benefits quickly evaporate as prices rise to absorb the saving.

We saw this vividly during Rishi Sunak's stamp duty holiday in 2020 and 2021, when the temporary exemption fuelled a surge in demand.

Prices jumped by more than ten per cent in a year, and the hoped-for affordability boost never materialised. Sellers and developers pocketed the windfall; first-time buyers faced fiercer competition and higher prices.

The same pattern has been repeated abroad. When Australian states introduced exemptions for first-home buyers, eligible property prices rose almost pound-for-pound with the tax cut. New Zealand’s relief schemes produced similar effects.

The underlying mechanics are simple - if every buyer suddenly has several thousand pounds more to spend, the bidding power across the market increases, and sellers adjust their expectations upward. Within months, prices climb to restore the previous equilibrium, and the supposed saving disappears.

The main beneficiaries of abolition would therefore be existing homeowners, developers, and estate agents. House prices would edge higher, transaction volumes would spike, and the perception of a buoyant market would please ministers and commentators alike. But for aspiring buyers, the dream of affordability would slip further away.

They would still need large deposits, but now for more expensive homes, and they would face even stiffer competition from investors and repeat buyers who could exploit the extra room in their budgets.

The fundamental issue with the UK housing market is not stamp duty, but a chronic shortage of supply. The country consistently builds fewer homes than are needed — roughly 200,000 to 250,000 a year when estimates suggest 300,000 or more are required just to keep pace with population growth.

With demand outstripping supply so severely, any policy that makes it easier to buy without increasing the number of homes available simply pushes prices higher. It is, in effect, pouring petrol on a fire.

If the aim is to help young people, more effective measures exist. Britain needs planning reform to accelerate construction, incentives for councils and developers to build affordable homes, and better long-term rental options that don’t trap tenants in precarious leases.

Stamp duty revenue could even be redirected into first-time buyer grants, infrastructure improvements, or shared equity schemes that actually expand opportunity. Without such supply-side action, removing stamp duty will merely shift money around, not open doors.

There is of course a case for reform. Stamp duty is clunky and unpopular. It discourages people from moving, locks older homeowners into unsuitable properties, and creates distortions around threshold prices.

A smarter alternative might be to replace it with a modest annual property tax based on value, or to offer targeted reliefs for new-build purchases rather than blanket abolition. But to scrap the tax altogether without addressing supply would be a political flourish with limited social benefit.

Abolishing stamp duty might generate short-term enthusiasm, a burst of transactions and upbeat headlines. Yet within a year the average house price would likely be five to eight per cent higher and the affordability gap wider. The frustration of young buyers would get deeper. The policy would enrich sellers and developers not those struggling to buy their first home.

If Britain is serious about tackling the housing crisis it must confront the harder problem: there simply aren’t enough homes.

Until that changes cutting taxes on property transactions may win applause in the Commons, but it won’t build a single new house and it certainly won’t make one more affordable.