The British property industry has hailed the decision to abolish stamp duty for most first time buyers as a bold step but there are concerns it could increase supply issues if existing owners cannot move up the housing ladder.
What is clear is that Chancellor Philip Hammond has listened to the industry. There were a series of meetings at Downing Street in recent months involving representatives across the housing sector and stamp duty was a major subject of discussions.
Crucially, the stamp duty abolition has been aimed at first time buyers in London where the market has been slower than the rest of the country due to much higher property prices. The fact that Hammond also announced that the vast majority of new home building will be high density in city centre will help supply in London too.
According to Henry Smith, chief executive officer of the Aitch Group, the move will come as a boost for London in particular, which has a number of emerging areas that rely heavily upon the presence of first time buyers. ‘There is still more to be done and the limit could have been increased, but we welcome any intervention that will encourage increased transaction levels,’ he said.
Generally experts are pleased that the Government has listened. But some have pointed out that it doesn’t go far enough as it doesn’t help those further up the ladder who can’t afford to move. If there are more first time buyers seeking an ever smaller pool of homes for sale the market could become blocked and prices rise even more.
Indeed, Miles Shipside, director and housing market analyst at property portal Rightmove, believes first time buyers should take advantage of the stamp duty change as soon as they can before the extra demand it creates pushes up price.
‘Speed and getting in early is important for aspiring first time buyers because supply of suitable properties is limited due to insufficient numbers of new build property in this sector over the last decade. To take advantage of the initial momentum this will generate, owners of properties that are suitable for first time buyers should think about coming to market if they have been thinking about making a move up the ladder themselves,’ he said.
Estate agents are positive about the change. ‘The announcement today from the Government to abolish stamp duty for first time buyers will have a positive impact on the market. It’s a smart move to ensure the dream of home ownership for young people can become a reality and will help buyers across the UK, including London and the South East where property prices are higher,’ said Mark Hayward, chief executive of the National Association of Estate Agents (NAEA).
But he too warned about the effect on supply. ‘We do however need to realise that this move will increase the demand for first time buyer properties and if we don’t have the supply it will push prices up. We have seen this in areas where Help to Buy is offered, as it attracts a great deal of interest from first time buyers,’ he explained.
According to calculations by online mortgage broker Trussle, first time buyers would have paid stamp duty of between £1,500 and £2,000 but now that has come down to zero for most of them. ‘This will have an immediate positive impact on the ability of young people to get on the property ladder. It will also reduce some of the stress associated with the journey to homeownership, which could have positive knock-on effects on the way that people manage their mortgage in the future,’ said chief executive officer Ishaan Malhi.
‘For those living in areas of the UK where property is more expensive, stamp duty will still be a consideration, but the hurdle is now much lower. In London, where the average first time buyer property costs around £410,000, the saving will be more than £5,000,’ he added.
However, Helen Morrissey, personal finance specialist at Royal London, believes that while it may sound like a good solution to helping young people onto the housing ladder, in reality it doesn’t go far enough as it doesn’t help those further up the ladder who can’t afford to move.
‘The current stamp duty regime is depressing the housing market and preventing thousands of transactions from going through. First time buyers can’t buy homes if current home owners can’t afford to sell them and so we need a much wider ranging review of stamp duty if we are to get a more fluid housing market,’ she said.
Maike Currie, investment director for Personal Investing at Fidelity International, warned that the stamp duty cut could perversely inflate property prices and does not address the problem of saving for a deposit.
‘Britain’s housing crisis is fundamentally an issue of supply and demand and with supply thin on the ground, older home owners also need the right type of properties to downsize too to ensure larger homes are freed up for the next generation. Short term quick fixes won’t address these long term, structural issues,’ Currie said.