STAMP DUTY CUT FOR FIRST-TIME BUYERS: WILL IT MAKE A DIFFERENCE?
Stamp duty has been scrapped for most first-time buyers. Will the tax break help young people trying to get a foot on the housing ladder?
The Chancellor has abolished stamp duty for 80 per cent of first-time buyers in a bid to boost home ownership among young people.
Philip Hammond scrapped the tax on homes priced up to £300,000 for those trying to get on the property ladder, saving each buyer an average £1,660.
In more expensive areas, such as London, where the average house price is £484,000, those buying homes costing up to £500,000 will pay no stamp duty on the first £300,000. This will save buyers up to £5,000.
However, in more affordable areas, such as the north and midlands, savings will be far less.
Promising to “revive the home owning dream in Britain,” Mr Hammond said the tax cut would benefit most first-time buyers. Government calculated the cost to the public purse would be £3.2bn between now and 2023.
Stamp duty is a tax that must be paid to government when a property above £125,000 is bought.
The majority will now pay no stamp duty at all under the changes. In total, more than one million young people are expected to benefit from the tax break over the next five years, according to the Treasury.
Dean Fisher, partner at Bishops Independent Estate Agents in Hampshire, said: “It is a small step in the right direction because it will be one less cost for young people but it’s not going to dramatically speed up the market. It is a tiny drop in the ocean.
“It will only save first time buyers an average £1,660 on houses valued up to £300,000. House prices are the real problem, especially in the south.”
Mr Fisher would like to see mortgage lending capped at four times the average salary instead of the current five or six times which he says pushes up house prices.
Paul Ackroyd, partner at Ackroyd and Ackroyd in Yorkshire, said: “It sounds good but it’s not going to make a massive difference to the market. It will depend on the area how much is saved.”
Mr Ackroyd said many first-time buyer properties in Yorkshire are below the £125,000 threshold for stamp duty tax, so there will be zero savings. In more expensive parts of the county, such as Harrogate, first time buyers would save hundreds rather than thousands of pounds, he said.
The Office for Budget Responsibility predicted the tax break would lead to only 3,500 more sales than would otherwise have occurred. It also predicted house prices would rise by 0.3 per cent as a result of the policy - benefitting property owners rather than first time buyers.
But Mark Batty, owner of Walton and Allen estate agents in Nottingham, disagreed. He said: “I can’t see house prices rising. We certainly welcome this policy. Mr Batty said first time buyer properties in Nottingham are between £125,000 to £150,000.
“It won’t save a great deal of money but first-time buyers will say everything helps. It is finding the deposit that is the big money.”
The policy has come into immediate effect in England and Wales but not in Scotland which has its own system.
To qualify, buyers would need to be purchasing a home for the first time and have never previously owned a share in a property. For couples buying together, both partners must meet the conditions.