- The stamp duty threshold has been raised from £125,000 to £250,000.
- The threshold for first time buyers has been raised from £300,000 to £425,000.
- The value of properties that can benefit from first time buyer relief has risen from £500,000 to £625,000.
- 200,000 people will be lifted out of paying stamp duty and all changes are effective today.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown:
“The horrendous cost of buying a house just got cheaper – at least for now. The stamp duty cut will ease some of the pressure on buyers right now. It’s particularly welcome as house prices rocket and interest rates continue to climb. But in the medium-term, it risks making life even harder.
This is the Treasury’s reaction to rising interest rates, which it is worried will squeeze the life out of the housing market. Higher mortgage rates and higher property prices form a toxic cocktail, that risks killing off demand. For buyers facing forking out thousands of pounds right now, it’s a welcome change.
However, there’s every chance that the change doesn’t drain the toxic cocktail, it just remixes it. Structural changes in stamp duty aren’t guaranteed to stimulate demand. When relief was introduced for first time buyers, the government assessed the impact the following year. It found that most of those who took advantage were going to buy anyway, so it only increased demand by around 1,000 transactions in the first 13 months. Given the costs involved, that worked out as a cost to the Treasury of around £160,000 per extra transaction. It was also calculated to have decreased the cost of buying by up to 0,5 percentage points, but increased prices by up to 0.7 percentage points – wiping out any cost saving for buyers.
Even if the change does persuade more people to buy, a shortage of buyers isn’t the biggest problem facing the property market right now , the real brake on the property market is a severe shortage of supply, because the average agent only has 36 properties on the books. Stimulating demand without addressing this just risks pushing prices higher. Higher prices coupled with higher mortgage rates are going to push properties further out of reach for millions of people, which could in itself end up scuppering sales. The property market is a delicate beast, and tinkering with tax incentives always risks producing a result you weren’t fully expecting.”
