As the time nears for the Chancellor Hammond’s Autumn Budget announcement next month, rumours of a cut in stamp duty for first-time buyers are floating around in a push to promote “intergenerational fairness” within the UK market.
Stamp duty is an additional cost to the home buying process that is often contested as it adds a tax bill on average of as much as £11,427 in the London market where properties average £428,546, or a few thousand pounds at least for the average UK buyer.
A 2% tax is added to properties ranging from £125,000 to £250,000, a 5% tax is added to homes costing above £250,001, a 10% tax is added to homes £925,001 and above, and finally, a 12% tax is added to homes costing £1.5m and above.
Home buyers in London would be most affected by the cut of Stamp Duty costs because of the high property values that have deterred the twenty and thirty somethings to get on the property ladder in the same way that their parents would have been able to a few generations ago. Even those making higher salaries than most are facing difficulties buying in the capital’s current housing climate.
There are worries that the eradication of stamp duty could push property prices up and that demand is still too high to for the supply for a cut in stamp duty to be successful. There are further concerns that if help is given to the younger generations then the older generations will suffer being charged higher taxes.
However, a change is needed and cutting out stamp duty just might be the answer to help first-time buyers get on the ladder.
Stamp duty is an archaic and anti-aspirational land tax that should be scrapped altogether or at the very least become the responsibility of the seller, which I pitched to Eric Pickles MP many years ago when he was Shadow Secretary of State for Communities and Local Government.
Despite efforts to level the playing field with the abolition of the traditional slab style system and the increased tax on high-end, second home or buy-to-let properties, homeownership has remained out of reach for many.
If the chancellor does reduce stamp duty for first-time buyers in next month’s budget, it will certainly be a step in the right direction and act as a massive shot in the arm for the sector as a whole.
While positive, one can’t help but be sceptical and see this move a smokescreen of sorts, masking the real issue of a severe lack of affordable property stock and the government’s failure to address it.
Lowering the barrier to entry is a step in the right direction, but the issue is an imbalance in the supply and demand for property that continues to keep prices overinflated.
Should Mr Hammond bolster his intent to help readdress this balance with the addition of freeing up unused land owned by various public bodies, he will be showing a real intent to tackle the housing crisis head on and it will no doubt put him on the Christmas card list of first-time buyers across the nation.Russell Quirk