John Healey, the UK Chancellor of the Exchequer, has been urged to reduce stamp duty on newly built homes as part of a proposal that could generate an estimated £4.2 billion in additional revenue for the Treasury. The call comes from Berkeley Group, one of the country’s largest housebuilders, which warned the housing market is facing a sharp downturn.

In a submission ahead of the upcoming Budget, Berkeley Group recommended capping stamp duty at 1 percent for first-time buyers and individuals downsizing their homes. The developer also called for the removal of the current 5 percent surcharge applied to investors purchasing newly built rental properties. According to Berkeley, these measures could stimulate construction activity and boost annual housing supply by up to 60,000 homes.

Rob Perrins, executive chairman of Berkeley Group, emphasized that reducing stamp duty remains “the best and quickest lever” to reignite the new-build housing market, especially when combined with the government’s recently announced Your First Home scheme. Introduced by Andy Burnham, this equity loan initiative aims to assist first-time buyers by offering a 20 percent government-backed equity loan alongside a 2.5 percent deposit, serving as a scaled-back successor to the earlier Help to Buy program.

However, Berkeley’s submission suggested that while Your First Home may provide some relief, it will not fully address the “acute crisis” in housing supply, particularly in London. The developer noted a significant decline in sales, citing data that showed only 8,840 private homes sold in the capital last year—a drop of 56 percent since 2022. Factors such as rising interest rates, geopolitical uncertainty, and increased taxation have contributed to this slowdown.

Berkeley acknowledged that introducing a stamp duty cap for first-time buyers might reduce immediate government revenue, but argued this would be offset by increased receipts from investor and downsizer transactions. The company estimated that abolishing the 5 percent investor surcharge would save typical buyers approximately £13,000 each. A modest 7 percent rise in sales would be sufficient for the Treasury to break even on the lost revenue, while Berkeley projected that sales growth could reach at least 30 percent, resulting in a £4.2 billion boost for public finances.

Additionally, Berkeley suggested that extending the stamp duty cap to downsizers could prove even more beneficial to the Treasury, as such moves tend to trigger a chain of subsequent property transactions, many of which would incur full stamp duty fees.

The government has yet to comment on the proposals, and reports indicate that earlier calls for stamp duty relief for downsizing buyers were rejected. John Healey is expected to unveil details of the new housing policy, including the Your First Home scheme, in this month’s Budget.