Stamp duty concessions on house purchases are reportedly set to be scrapped, potentially adding up to £15,000 to the cost and threatening a first-time buyer boom. According to analysis by experts at Hargreaves Lansdown, this would result in the percentage of first-time buyers paying no stamp duty when buying their first home dropping from 80 percent to 60 percent.
It’s anticipated the stamp duty threshold for first-time buyers will reduce to £300,000 and only apply to properties worth up to £500,000. Hargreaves Lansdown has noted a significant increase in the number of first-time buyers in 2024, but fears the removal of the stamp duty concessions will halt this momentum.
Sarah Coles, head of personal finance, has highlighted 2023 as a pivotal year for first-time homebuyers, stating: “This is the year of the first-time buyer, as the horror of renting is persuading more tenants to take the leap into home ownership.”
She noted that “Rents have been driven up and mortgages rates are dropping, so that owning a typical first-time buyer home is now 17 percent cheaper than renting.”
Coles pointed out the difficulty in escaping the rental market, saying, “Escaping the rental trap is no mean feat. Lower mortgage rates mean that once they’ve built a deposit, their monthly outgoings can be much lower. However, the real challenge is building a deposit at the same time as paying sky high rents.”
She mentioned that many young buyers are turning to family support and personal sacrifices to save for a deposit. Additionally, she emphasised the benefits of saving through a Lifetime ISA (LISA), which offers a 25 percent government bonus, capped at £1,000 annually.
However, Coles warned of upcoming challenges, adding: “We’re currently coming to the end of a stamp duty holiday – ushered in by the mini-Budget as a permanent change and then given an end date by Jeremy Hunt. It means there’s no stamp duty for first-time buyers on the first £425,000 of a property’s value – which applies to all homes worth up to £625,000.”
“We’re not expecting Rachel Reeves to mention this in the Budget, let alone extend it. It means the stamp duty threshold for first-time buyers is expected to fall to £300,000 and only apply to properties worth up to £500,000. The percentage of first-time buyers paying no stamp duty would then drop from 80 percent to 60 percent, and the percentage paying partial duty will double from 14 percent to 28 percent.”
Hargreaves Lansdown has noted that amid speculation the Budget might increase Capital Gains Tax on property profits, there’s been a flurry of property investors looking to offload second and third homes to dodge potential tax hikes. Sarah Coles commented: “It means the extra buyers hitting the market have plenty to choose from, so we’re seeing the number of sales rise rather than prices.”
Property experts at Zoopla have indicated that the end of the stamp duty holiday could hit harder in southern England, where average first-time buyers (FTBs) in London and the South East would face stamp duty costs of £5,600 and £1,390 respectively, as opposed to nothing currently.
Zoopla added: “In parts of London such as Camden, Hammersmith and Fulham and Islington with average house values over £600,000, FTB could pay an additional £15,000 in stamp duty. Faced with higher buying costs, FTBs will want to pay less for homes in these areas which will keep price rises in check.”
Nathan Emerson, Chief Executive of Propertymark, commented on the upcoming fiscal events with optimism: “We hope that this week’s Autumn Budget will be used as a springboard to improve housing supply. Propertymark has long argued that Stamp Duty reform is one way to do that, especially for those wishing to downsize.”
He also expressed expectations for the Bank of England’s meeting, saying, “When the Bank of England’s Monetary Policy Committee meet on Thursday next week, we hope to see further progression on potentially cutting interest rates as this will continue to improve the overall health of the economy.”