Stamp duty cut for first buyers – but will it really help?
The decision by Chancellor Philip Hammond to abolish stamp duty for most first-time home buyers in England and Wales has met with a mixed reaction from property experts and analysts.
In the Budget, Mr Hammond announced that the first £300,000 of the price of a property will be exempt from tax for people entering the housing market for the first time. The change came into effect immediately.
It means that the new stamp duty cost for first-time buyers will be:
- properties up £300k, no stamp duty
- properties between £300k and £500k – 5% on the part above £300k
- properties over £500k – no entitlement to relief.
Mr Hammond said the change means 95% of first time buyers will see a reduction in stamp duty, providing them with a saving of up to £5,000, depending on the purchase price.
However, some analysts say the change will provide little benefit for many first-time buyers, particularly those in the north of England where houses are cheaper and so attract little stamp duty anyway.
Analysts at AJ Bell told the BBC that the average Stamp Duty charge in the north is just £11.82 and so the benefit of the new relief would be felt disproportionately in the south, where property prices are much higher.
The Office for Budget Responsibility said it expects all house prices to rise by 0.3% within a year because of the change so the main beneficiaries would be existing homeowners, rather than first-time buyers.
It also estimates that it will result in only an additional 3,500 first-time buyer purchases.
Mr Hammond rejected the idea that the change would simply result in increased prices because the government also intended to increase the number of houses being built, which would help to keep prices down.
In his Budget speech, he pledged an investment of £44 billion to get more housing projects started and deliver 300,000 new homes a year.
Please contact Lucie Stewart or Dipak Odedra if you would like more information about the legal aspects of buying or selling a property.