# Mid-year musings: the UK housing market
_In part two of my mid-year reflections, I look at the UK housing market — why government housebuilding targets are doomed to fail, how stamp duty is choking the market and the wider economy, and why it’s time to cut SDLT and interest rates to unlock growth._
Neil Woodford · 11 July 2025 · 4 min read
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In the second part of my mid-year musings ([see part 1 on the UK stockmarket](https://www.noisecancelling.co/read/mid-year-musings-uk-stockmarket-2025-07)), I wanted to make a few points about the housing market.
The housing market is important to the government and the wider economy for different but related reasons. The government's house-building targets are an important pillar of its economic growth agenda, but to the wider economy, the health of the market is a key driver of consumer confidence, consumption and saving behaviour, and economic mobility, both geographic and inter-generational.
I suppose the first point to make, and one of the most obvious, is that the government's house-building target, which was to build 1.5 million new homes by 2029, will not be met. Apart from the fact that it was never within the government's ambit to deliver this target, the things that the government could control and might have helped the industry grow the volume of new housebuilding have already failed to have the impact Angela Rayner expected. In particular, the OBR estimates that the planning reforms this government introduced, for example, will only lead to an extra 170,000 homes being built in England, less than a fraction of the amount needed to hit her target.
Nevertheless, a number of government ministers have rightly pointed out that the extra 170,000 homes will boost economic growth, and this got me wondering if those who said this might understand the broader impact a more buoyant housing market would have on the economy.
I say this because it's very clear to me that the friction costs successive administrations have loaded onto housing transactions, with the latest increases in stamp duty adding to the burden, have massively depressed activity in the market and, in turn, depressed its potential to help the economy deliver the growth the government longs for.
To help make this point, here are some really interesting charts.
Clearly, transactions are only slightly higher as a percentage of the total number of owner-occupied homes than they were during the global financial crisis and in its immediate aftermath, and indeed, only slightly higher than during the pandemic, but the chart also shows how fundamentally depressed the market is compared to more normal levels of activity. This is also reflected in this next chart, which shows how insipid mortgage lending growth has been in recent years, at an average of 3% since the pandemic, dramatically lagging nominal growth in the economy.
If, like Keir Starmer and Rachael Reeves, I was scratching my head, looking for a solution to the economy's many growth challenges, I would start by looking here. Stamp duty, or more accurately, SDLT, has been seen as the gift that keeps giving by successive governments, and yet since 2018, the SDLT take is down about 15% in real terms (it currently raises about £15.2bn or just over 1% of total government spending in 24/25). Government spending is up over 50% in nominal terms over the same period.
This is a perfect example of the Laffer Curve in action; the higher the tax rates have gone, the less revenue has been raised because economic activity, or in this case, people buying and selling houses, has been discouraged. This doesn't just impact the government's finances but also has wider, damaging economic consequences.
People, often older households, remain in properties that are no longer appropriate for them, mobility in the economy is undermined, (the average "holding" period for an owner occupied house is now just below 17 years) and a general lack of activity in the housing market denies the government the significant revenue raising opportunities that come with higher transactions and all the associated spending and investment activity that is linked with moving house. Of course, this also undermines the growth potential of the economy too.
Some might argue that the depressed housing market is all about affordability and has nothing to do with excessive SDLT rates. Although I agree that UK interest rates are too high, this chart shows that assumption is wrong, based on first time buyers being a proxy for the wider market.
To finish, I should add one more point I have made before on _Woodford Views_. Namely, that excessive interest rates in the UK haven't just discouraged activity in the housing market, they have also led to an imbalance in household saving and spending behaviour. UK saving rates have averaged 11% since the pandemic and are currently at 12%. That's about twice the average before the pandemic.
Clearly, uncertainties related to the pandemic and the subsequent spike in energy prices created some caution in the household sector and naturally led to higher savings. But the imbalance now between saving and borrowing looks odd in the context of the UK's economic history. For example, the ONS estimates what it calls excess saving accumulated by UK households since the pandemic, may be as high as £338bn. Imagine what might happen to the UK's growth rate if the saving rate fell to a more "normal" level and a just a proportion of this giant nest egg was spent.
## Conclusions
The government should understand that its tax policy on housing transactions is undermining not just the economy's growth potential but also its tax revenue. A radical approach to the future of SDLT (cutting it substantially or even removing it altogether) could not only raise significant additional revenue for the government through VAT receipts on higher spending but also liberate faster growth in the UK economy.
If accompanied by lower policy interest rates, which Alan Taylor, an external member of the MPC, has recently advocated, then this really could get the economy motoring and, in turn, solve the government's current fiscal discomfort well before the end of its five-year term.