There’s no doubt that the cuts in Stamp Duty, announced by Chancellor Philip Hammond in his latest Budget, will be warmly received by the majority of first-timer buyers.
Stamp Duty Land Tax (SDLT) has been abolished altogether on all houses worth up to £300,000 while a 5% rate will be charged on the portion between £300k up to £500k in more expensive properties.
It is estimated that the move will cut the tax for 95% of first-time buyers and abolish it completely for 80% of them.
The changes will not extend to first-time buyers in Scotland, which has its own independent system of applying land tax, but will apply with immediate effect in England, Northern Ireland and Wales, albeit Wales is replacing SDLT with its own land transaction tax rates from April 2018.
The question is, how are the changes likely to affect houses prices?
Subsequent commentary from the Office for Budget Responsibility (OBR) suggests the new rates of SDLT are likely to push house prices up, predicting a 0.3% rise over the next year, with most of the increase coming in 2018.
The OBR also pointed out that: “The main gainers from the policy are people who already own property, not the FTBs [first-time buyers] themselves.”
The Resolution Foundation, a leading think tank, has also said the tax break will actually inflate house prices by an average of £3,200 – in other words, more than the average £1,600 saving it is expected to deliver.
So, it is fair to say, there seems to be some cynicism about the latest announcement. It’s not all bad news, though. FTBs with smaller deposits won’t end up passing all the benefit on to the tax-man, meaning they can push up their deposits and buy themselves a superior property. So, a possible gain in the short term, but we’ll have to wait a little longer to see if the increased property price predictions become reality.
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