The catch-22 holding back the property market in Britain — and the clever idea that could take the handbrake off

It’s funny how the home you once thought perfectly suited your needs can suddenly feel incredibly small once you throw young children into the mix.

Of course, young families seeking more space is not a new phenomenon. But how do they actually get the keys to larger homes if the existing owners carry on living in them long after their children have grown up and left?

Older homeowners often remain in their family homes for many years — decades even. Nick Leeming, chairman of Jackson-Stops, explains: ‘Potential downsizers are out there and looking, but many still lack a driving reason to move from window shoppers to serious movers.’

Well, Jackson-Stops has a suggestion: stamp duty break for downsizers.

Before I delve into the details, it may be worth a recap on stamp duty, which is paid by buyers (not sellers). The tax is based on the price of the property. So, a downsizer buying a home for £500,000 would face a stamp duty bill of £15,000. That sum might well be outweighed by any equity released, but with people balancing their pensions, savings and retirement living plans, it's still a huge amount.

Now, back to Jackson-Stops, which surveyed 2,000 homeowners aged 55 and over in England and found that 22% don’t ever plan to downsize.

But among those who do intend to scale down, 15% would do so within the next year if stamp duty was reduced or removed when buying their next home. That could unlock more than 500,000 homes within a year.

The figures get even more striking when looking at longer timescales. Nearly half — 41% — say they would downsize within two years under the same scenario. That’s the equivalent of 1.4 million homes — the sort of family homes that are relatively thin on the ground — potentially hitting the market. Over five years, Jackson-Stops research suggest 2.5 million homes would come to the market if downsizers were handed Stamp Duty relief.

That would have a wider knock-on effect, too: families upsizing opens up opportunities for other buyers, including those stepping onto the housing ladder for the first time.

Leeming explains: ‘Stamp duty is acting as a brake on the housing market, keeping older homeowners in properties that no longer suit their needs and blocking supply for younger families.

‘At a time when the Chancellor faces pressure to boost tax revenues, carefully designed stamp duty relief for downsizers could offer a valuable short-term solution — stimulating market activity, releasing homes, and generating additional tax receipts that might otherwise be delayed or lost,’ adds Leeming.

Jackson-Stops aren't the only people arguing that it's downsizing that is stifling the market. Jonathan Brandling-Harris, co-founder of House Collective, recently wrote in the Telegraph that ‘the reality of downsizing in this country is daunting. It’s expensive, emotionally taxing, and, in many cases, downright impractical.

‘Stamp duty is one of the biggest barriers,' he continued. 'For someone in their 60s or 70s looking to downsize in London or the South East, it’s not unusual for the tax bill alone to exceed £25,000. That’s enough to stop even the most motivated mover in their tracks.’ Brandling-Harris's solution? A one-off Stamp Duty exemption for house movers aged 65 and over — effectively the reverse of the First Time Buyers' Stamp Duty Relief which has been in place for the last decade or so to help those buying their first place.

In leafy south west London, Geoff Wilford, founder of Wilfords London, reckons Stamp Duty is one of the biggest culprits behind the logjam in the family house market.

‘For older homeowners in places like Wandsworth, Clapham and Battersea — many of whom are mortgage-free and have lived in their homes for decades — the cost of moving simply doesn’t stack up,' he says. 'Stamp duty on a smaller, more manageable home can feel like a penalty, not a step forward.

‘As a result, people stay put in houses that no longer fit their needs, while growing families are left scrambling for space.’

Wilford believes a Stamp Duty break for downsizers could be transformational: ‘In areas with tiny school catchments, even a modest uptick in supply could make all the difference. These homes should be filled with the sound of children — not stuck in a holding pattern.’

One question does remain: higher mortgage rates, the cost of living squeeze, and the imposition of VAT on private school fees have all taken their toll on buyer budgets recently, so would a wave of new homes for sale be affordable for young families? The intricacies of push and pull in the housing economy are notoriously difficult to judge, but Jackson-Stops research suggests that London, the East of England and the South West in particular would see the greatest volume of homes released for sale. Anything that helps people find a family home in those areas feel like it could only be a good thing.