The Stamp Duty Surprise – What It Means

Recently we blogged about how the Conservatives were hoping to boost the savings of first-time buyers through their Help to Buy ISA (if you missed it, you can read the blog right here: The complete guide to the Help-to-Buy ISA). Yet despite this and other schemes (such as the Help to Buy Shared Ownership scheme) many first-time buyers are still struggling to get on the housing ladder, with home ownership falling to its lowest level in thirty years.

It’s clear that there’s much more to be done, and its seems that it was this challenge that Chancellor Phillip Hammond had in mind when he announced his surprise addition to the Autumn 2017 budget – the eradication of stamp duty for first time buyers. Yet already there’s debate around just what this means for buyers – with many declaring the policy as nothing more than a waste of taxation that will only lead to a limited number of new first-time buyers. So, what’s the truth? Here we take a look at Hammond’s plans and explain why there’s such a debate as to just what it may mean for buyers, sellers and the wider property market.

“Hopefully, by abolishing stamp duty, which will save the average first-time buyer about £1,700, that will be a help and an incentive to focus on getting the deposit together, getting the money together to get on the housing ladder, and we hope that many more young people will be able to get on the housing ladder” – Phillip Hammond, Chancellor of Exchequer

The Stamp Duty Cut: What has been proposed?

The average first-time buyer pays around £1,700 in stamp duty – something that Phillip Hammond has now announced won’t be payable on properties that cost less than £300,000. For homes above this bracket and up to a value of £500,000 there will be reduced rates.

If we take the example of a top end £500,000 property, before the changes a first-time buyer would have paid around £15,000 in stamp duty. Following the cut this bill will be slashed to £10,000.

Good, bad or indifferent? The conflicting opinions

Claim: House prices will be pushed up

The main criticism of the Stamp Duty cut is the argument that it will actually push house prices up. This point, made by the Government’s fiscal watchdog the Office for Budgetary Responsibility, argues that it will be homeowners, rather than buyers, that benefit from a property value rise of 0.3% by the end of 2018. Why? Because, it is argued, buyers will then be able to afford larger deposits. Hammond has refuted the claim, saying…

“They look at what would happen if you cut stamp duty for first time buyers and did nothing else. But we have a big package on the housing market to create growth and deliver more homes” – Phillip Hammond, Chancellor of Exchequer

Claim: There will only be a small number of new first-time buyers

Numerous critics of the proposed Stamp Duty Cut have voiced concerns as to just how many new first-time buyers this policy will help create. Cross-party MPs have joined forces to claim that they’ll only be around 3,000 or so property purchases made possible by the savings made.

This criticism may not be unfounded either, as data shows the last Stamp Duty holiday (under Gordon Brown back in 2008), led to just 76 additional purchases, per month – costing taxpayers £160,000 a time, owing to the expense of administering the policy.

“Once first-time buyers have saved for a deposit, stamp duty might not actually be a significant cost for them at all. In London, although the stamp duty saving seems large at an average of £11,000, compared with the cost of a deposit it’s not a huge saving” – Lucy Brennan, partner at accountancy firm Saffery Champness

Claim: The initiative will do nothing to overcome the real problem with the housing market

A final criticism of Hammond’s plans lies in another timeless housing market issue – difficulties in moving up or down the ladder, which result in a stranglehold on a market that could and should be more fluid.

“The inability of existing owners to take a ” second step” up the ladder – thanks largely to hefty duties – constrains the supply of homes appropriate for first-time buyers. Clearly, building more houses in the first-time buyers’ price range is key, but an efficient form of taxation is important for ensuring that we make the most of the existing property stock” – Christian Jaccarini, economist at the CEBR

So, what’s the truth of the matter?

With so many arguments and counter arguments, claims and rebuffs, it’s difficult to predict exactly what the future may hold for the property market. However, even if all parties and market experts were in agreement, we still face uncertain times. After all, Brexit looms on the horizon – an event that could well shake up the market and disrupt all expectations, and the recovery of the UK economy is still far from over – despite us being some ten years on from the financial crash. It seems that this policy will very much be a matter of ‘time will tell’.

Will you be amongst the people making a move because of the savings scooped on stamp duty? Whether you’re better off, or faced with a move between rentals, we’ll be right here when you need us, with York’s most reputable home movers service.

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The Stamp Duty Surprise – What It Means