In a bid to improve homeownership throughout the UK, It was announced in the latest autumn budget that first-time buyers will no longer face the cost of stamp duty.
There were many changes announced by the government in the most recent budget, but the major headline was the scrapping of stamp duty for first-time buyers on all properties up to a value of £300,000.
This change will take effect immediately and could save first-time buyers a potential £5,000 in fees when completing on their home.
What is Stamp Duty?
Stamp duty is a tax applied to any property purchase priced at more than £125,000. The latest reform will see the minimum stamp duty limit increased to £300,000. This means that according to statistics, approximately 80% of first-time buyers will save money on stamp duty fees.
For first time buyers buying a property within the range of £300,000 to £500,000, they will pay less stamp duty as the rate has been set at 5%. While buyers in this price range won’t avoid the tax completely, buying a home valued at £500,000 will now cost you £5,000 less.
How could this move affect the market?
While it is still very early days and it may be some time before we see a reaction from the market to this reform, some experts are suggesting that vendors will simply respond by raising the price of their home.
The Office for Budget Responsibility shared this opinion saying that “…the main gainers from the policy are people who already own property, not the FTBs themselves"
Other experts believe that house prices are the real problem and while the scrapping of stamp duty will save first-time buyers some money, it doesn’t mean that they will rush to buy a home now that this reform is in place.
Tom Kibasi of the Institue of Public Policy Research commented, saying “Unaffordable house prices are the problem, not Stamp Duty. For most young people, the stamp duty cut will make little difference. But it will help the beneficiaries of the bank of mum and dad.”