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Property market experts said that the chancellor’s Budget trump card of cutting stamp duty for first-time buyers would do little to help buyers struggling to save for a deposit.
The decision to abolish stamp duty for first-time buyers on properties valued at up to £300,000 will be applied immediately, the chancellor announced, adding that those buying properties valued at up to £500,000 would only pay stamp duty over the £300,000 threshold.
Stamp duty is not payable on properties worth less than £125,000, but over that the threshold rises steeply. Under the new rules, a first-time buyer would save up to £5,000 — the amount previously payable on a £300,000 property.
“This is treating the symptom, not the cause,” said Tim Bennett, head of education at Killik & Co, a wealth manager.
“[It] will only help those buyers who are already making progress on saving a deposit. The real challenge is to help buyers save that initial deposit — and we haven’t seen anything so far in this Budget that will directly support young people on overcoming that much bigger financial challenge.”
Simon Heawood, chief executive and founder of Bricklane.com, an online investment platform, said that while he welcomed the move, abolishing stamp duty would be “a drop in the ocean given the affordability challenge of getting Generation Rent on to the property ladder”.
“The focus on bridging the housing generational gap must lie on the all-important first rung of the ladder — saving up for a deposit,” he said.
Some had hoped that the amount the under-40s could save into the Lifetime Isa would be increased from £4,000 per year, but the chancellor failed to oblige.
Nevertheless, first-time buyers on the verge of completing their first property deal were jubilant.
Isobel Goodrich, a 28-year-old first-time buyer in London, said: “The stamp duty news makes a real difference to my boyfriend and I. We were looking at a bill of over £10,000 and now that is hugely reduced. It means we can spend much more on renovating our flat, which we would have struggled to do before.”
“It’s such a big saving,” said Hestor Manning-Marsh, 28, who is looking to buy property in east London. “It really boosts the amount I can use from my savings for a deposit and is a real relief.”
Commentators warned the joy could be shortlived if the stamp duty measures boosted demand significantly, as this could lead to higher house prices.
“Changes to stamp duty land tax rarely work entirely in the way that governments intend them to,” said Jeremy Raj, partner and head of London residential property and Irwin Mitchell, an estate agent.
“This could lead to some prices going up, and sellers digging their heels in on price when dealing with first-time buyers — working exactly against what it intended to do. Plus more sales can lead to house prices going up, if demand outstrips supply.”
Rental properties could also feel the impact of the policy, said Jeff Knight, director of marketing at Foundation Home Loans. “Maintaining the current rate of stamp duty for landlords will naturally cause them to batten down the hatches and protect their income,” he said. “A quarter of landlords said they would increase rents next year if there was no change in this policy — unsurprising given the raft of changes to buy-to- let.”
The average first-time buyer will save £1,660, based on the average first-time buyer property value of £208,000 according to HM Treasury. Those in London and the Southeast could benefit from the greatest savings. The average first-time buyer in London now spends a record £409,795 on their first home according to Halifax data, translating into a potential £5,000 stamp duty saving.
Elsewhere in the country, average first-time house prices are lower, with those in the north paying an average of just over £125,500 according to Halifax at the end of July 2017, barely inching over the current stamp duty threshold.
According to research carried out by online estate agents HouseSimple.com, more than two-thirds of properties on the market in the UK are valued at £500,000 or less and would benefit from the reduction. In London, just 32.3 per cent of properties currently on the market are below the £500,000 level.
In his statement, the chancellor acknowledged the difficulties facing first-time buyers, who he said “would need to save for years”.
The housing crisis had been flagged as a key issue for the chancellor in his Budget. According to data from the Department of Communities and Local Government, the number of homeowners under the age of 45 in England has dropped by 904,000 since the Conservatives entered government in 2010, down from 4.46m in that year to 3.56m in 2015-2016.