The Chancellor’s Budget announcement that first-time buyers will be exempt from stamp duty on properties costing up to £300,000 has been met with a mixed response.
While many first-time buyers have welcomed the move, property commentators have warned it could simply push house prices higher, while others pointed out it did little to address the current affordability problems.
Chancellor, Philip Hammond announced in yesterday’s Budget that first-time buyers purchasing a property costing up to £300,000 will not pay any stamp duty, while those buying a home worth up to £500,000 will only pay the tax on the proportion of their home above £300,000.
The change – which lands with immediate effect – will save someone paying £200,000 for their first home £1,500, while a first-timer making a £500,000 purchase will be £5,500 better off.
What’s the response?
First-time buyers – many of whom may be represented in our Twitter poll (below) which revealed a 75% approval rate – welcomed the move, claiming the savings would enable them to buy a property sooner, opt for a more expensive home or carry out improvements on a place they were already in the process of purchasing.
Is the Chancellor's £300,000 stamp duty holiday for first-time buyers a good thing?— Zoopla (@Zoopla) November 22, 2017
Mark Hayward, chief executive of NAEA Propertymark, also welcomed the announcement, but added: “We do however need to realise it will increase demand for first-time buyer properties. And if we don’t have the supply it will push prices up.”
Sandy, commenting on Zoopla’s Budget article comments section, agreed: “Any scheme that puts extra money into a market with a severe shortage of stock/supply will only raise prices,” she said.
In fact, the Office for Budget Responsibility (OBR) has predicted the change will increase house prices by 0.3% in the next 12 months.
Others pointed out the move did little to address the affordability issues first-time buyers face, with the average person needing a £32,899 deposit to get on to the property ladder.
Richard Donnell, Insight Director at Hometrack said that, while the stamp duty cut would be a ‘comfort’ to first-time buyers, it fails to address the biggest barrier which is the level of income required to pass lender affordability tests.
“Saving a thousand pounds or more on stamp duty doesn’t address affordability for first-time buyers in south eastern England, but for those that can get a mortgage it will be a welcome bonus.”
Do you qualify for the first-time buyers stamp duty break? Check out our Q&A
Above: this Oxfordshire church conversion for £500,000 would cost a first-time buyer £10,000 in stamp duty, opposed to £15,000 pre-Budget
Jonathan Harris, director of mortgage broker Anderson Harris, agreed adding that, until the gap between incomes and property prices was addressed, homeownership would remain a pipedream for many people.
He said: “The saving might enable a first-time buyer to purchase a new sofa, but will it really make the difference between being able to buy a home or not?”
The regional impact
Mortgage lender Halifax also pointed out that the change will have a varied impact on first-time buyers in different regions. At the extreme end of the scale, people purchasing their first home in London will save an average of £5,000, seeing their stamp duty bill almost halve to £6,060.
Savings are also substantial in the south east at an average of £3,948, while those in the south west and East Anglia will be just over £1,600 better off, said the bank.
But the typical first-time buyer in Northern Ireland will not save any money, as the average property there is priced below the £125,000 threshold at which stamp duty kicks in.
Those in the north will save only around £24, while first-time buyers in Wales, Yorkshire and the Humber and the north west will be less than £500 better off.
Going up the ladder
Meanwhile, others pointed out that those trying to trade up the property ladder needed assistance too.
Tom Dunn commented on Zoopla: “It’s all great for first-time buyers, but what about everybody else?” He said many people faced difficulties buying a family home and the cost of stamp duty for those trading up the ladder was disproportionate.
Gráinne Gilmore, head of UK residential research at Knight Frank, agreed: “Policymakers may want to turn their attention to the rest of the market next, as there is evidence that movement up and down the housing ladder is also hampered by the cost of stamp duty.”