The Government appears to be floating the idea of a 1% Stamp Duty cut for first-time buyers in next month’s Budget.
The Evening Standard yesterday ran an article badged as exclusive yesterday claiming Philip Hammond is considering the move in a Budget that will “aim to help people in their twenties and thirties and restore ‘inter-generational fairness’ to the system”.
It is unclear if this would just apply in London or be UK-wide.
Many commentators, including agents, have called for something to be done about Stamp Duty, claiming it is holding back transactions.
The Evening Standard – whose editor is former Chancellor George Osborne – said: “Stamp Duty is a massive extra cost for people trying to buy their first home, especially in London.
“It means a tax bill of £11,427 for the average first-time buyer in the capital, according to the Land Registry, which recorded the average price paid by new entrants to the London property market as £428,546. Even a starter flat costing £250,000 attracts a Stamp Duty bill of £2,500.
“Mr Hammond is looking for ways to restore young people’s faith in the system at a time when senior ministers fear the link between working hard and getting on has been badly weakened.”
Yesterday evening Richard Donnell of property data firm Hometrack said: “Any move by the Government to reduce the impact of Stamp Suty on housing market activity and potentially offer savings amounting to several thousand pounds for first-time-buyers is welcome. However, Stamp Duty is just one consideration impacting the ability of first time buyers to access the housing market. Mortgage affordability testing remains a major hurdle.
“The number of first-time buyers in London has fallen by 12% since 2014 to 42,400 in the last 12 months. Numbers have fallen on high house prices which have pushed up deposit requirements to an average of £70,000 for a typical first-time buyer home.
“Mortgage affordability tests require that applicants can afford to pay a ‘stressed’ mortgage rate. While the monthly cost of renting in London is more than the cost of buying at a mortgage product rate of 2.4%, the cost of a mortgage at the stress rate of 7% would require a renter to be able to afford housing costs that are 60% higher than the cost of renting.
“This creates a major hurdle for first-time buyers trying to access the housing market in London.
“If the Budget were to cut Stamp Duty for first time buyers in London to a flat 1%, then our analysis shows this would save first-time buyers in London an estimated £340m per annum out of a total annual Stamp Duty bill across the UK of £8.6bn, representing a 4% reduction in total Stamp Duty receipts.”
Meanwhile, one agent has claimed that sales of flats in London collapsed by almost half in the 12 months to July.
James Pendleton, an agency that focuses on the south and west of London, says the number of London flats sold in July 2016 was 4,709 but by July 2017 this had dropped to 2,494.
While flat sales tumbled, transactions on other types of property also fell but not so severely.
The number of detached properties sold fell 5% in 12 months to 143 in July this year, semi-detached sales were down 1% to 516 and sales of terrace houses down 8% to 1,476.
Lucy Pendleton, director of James Pendleton, said: “This a classic sign that first-time buyer demand is sensitive. There is a temptation to wait on the sidelines while prices become more realistic.
“A reality check is in the offing.
“Solid numbers of people are showing some reluctance at current prices and signalling to all the other market participants they can’t transact unless they come back down to earth.”