It made a great headline. With a shake of his red box, Phillip Hammond made stamp duty disappear for first time buyers eyeing properties up to £300,000. Even for those with their heart set on more expensive areas, the first £300,000 of the cost of a £500,000 property will be exempt from stamp duty. Now 80% of first time buyers won’t pay any stamp duty at all.
This dramatic statement is sure to warm to the hearts of first time buyers, perhaps even loosen Jeremy Corbyn’s tight grip on the Millennial vote. However, this small victory for first time buyers may come at the expense of others.
“First-time buyers will, I am sure, welcome the abolition of stamp duty on properties up to £300,000 but without rapid action on the supply side, we run the risk of house price inflation,” said Spencer McCarthy, Chairman and CEO of Churchill Retirement Living.
For many in the industry, the gesture was merely smoke and mirrors. First time buyers outside London are unlikely to pocket much from the move. A saving of around £1,500 pales in significance next to the size of deposit needed in today’s market. In areas where homes are comparatively cheap, stamp duty rarely added up to £100.
“Although Philip Hammond’s proposal to abolish stamp duty for qualifying first time buyers sounds good, it is little more than a gimmick and does little to solve the housing crisis,” said Rob Desbruslais, Director of Hove and London-based Desbruslais Chartered Surveyors. “If anything, it will simply increase the short-term demand without bolstering the supply, inflating house prices even more.
“In addition, the savings people trying to get on the housing ladder will make are actually quite minimal. To achieve the maximum saving of £5,000, first time buyers need to spend £300,000; but Halifax’s First Time Buyer review states that 74 per cent of first homes sold last year cost less than £250,000.”
“Abolishing Stamp Duty on purchases up to £500,000 put bluntly is a headline rather than a real fix to the deep-rooted housing affordability issues across all income brackets,” added Andrew Kafkaris, Chartered Surveyor and Founding Partner at Bruton Realty.
Even with a few extra hundred quid in their pocket, a first time buyer will still face a crippling lack of choice. Yesterday, a new Labour analysis revealed that no new ‘starter homes’ have been built in three years, despite the Conservatives’ promise to build 200,000 of them.
Nick Leavey, partner and head of commercial property at law firm Coffin Mew, said, “Although scrapping stamp duty for qualifying first time buyers might seem bold, it will simply increase demand in the short term with no corresponding increase in supply, leading to higher house prices and land values.”
Many were waiting for Hammond to explain how SDLT receipts would be used to fund the building of more homes. However, they were left disappointed.
Ian Fletcher, Director of Real Estate Policy, British Property Federation, said, “The bigger prize is to use changes to SDLT strategically to stimulate supply, which the Chancellor has failed to do in his Budget this year. SDLT is a transactional tax, an explicit barrier to social mobility, putting people off moving house. It’s also deterring investment into housebuilding, which ultimately has a knock-on effect on the volume of affordable housing provision.”
Dubbed the Millennial Budget, Phillip Hammond set out to woo young voters. However, many believe this came at the expense of others.
“The Government is still focusing far too narrowly on one end of the housing market,” said McCarthy. “When will they realise that the only way to improve things is by looking at the full range of housing supply? Of course it’s important to support younger people, but Stamp Duty exemption for first time buyers is just an attempt to win votes and won’t do anything to fix the market’s wider problems. We also need to help more older people to downsize – this would spark a positive chain reaction across the whole housing market.”
“Stamp duty has affected all sectors of the market and has caused transactions to fall across the board,” said Martin Walshe, Head of New Homes, Cheffins. “Probably the most noticeable effect has been on the middle and prime markets and this should be addressed if Philip Hammond wants to kick-start the housing market. Increased activity in the upper and middle markets ought to have a knock-on effect, increasing transactions and freeing up property at all price points.”
The Build to Rent market was also neglected, amidst criticism that the Chancellor was focussing on home ownership at all costs.
“While we are delighted with the recognition and support now being given by the government to the build-to-rent sector, the 3% SDLT surcharge remains an unnecessary and counter-productive barrier to a sector with billions of pounds available to deliver high-quality rental homes,” said Andrew Kafkaris, Chartered Surveyor and Founding Partner at Bruton Realty, said. “If the Chancellor is not brave enough to abolish it completely, then the first priority should be changing the guidelines that homes built for affordable private rent are subject to the 3% SDLT surcharge. The chancellor should cut the surcharge for this tenure to encourage the provision of greater levels of accessible homes.”
SDLT is a golden goose for the government, and it’s understandable that the Chancellor reserved its abolition for the areas which make the best headlines. Unfortunately, this small victory for first time buyers may come at a great cost unless supply and affordability are tackled in a meaningful way.