First-time buyers were last night handed a tax cut of up to £5,000 after the Chancellor abolished stamp duty for the vast majority of them.
In a boost for young people struggling to get on the housing ladder, Mr Hammond scrapped the levy for first-time buyers on properties worth up to £300,000.
Meanwhile those buying homes worth up to £500,000 will pay no stamp duty on the first £300,000.
Promising to ‘revive the home-owning dream in Britain’, Mr Hammond said the move would benefit 95 per cent of first-time buyers.
Eight in ten will now pay no stamp duty at all. In total, more than one million young people are expected to benefit over the next five years, the Treasury said.
However the Office for Budget Responsibility warned that the radical changes would simply push up house prices and leave home ownership further out of reach.
The official Government forecaster predicted house prices would rise 0.3 per cent over the next year as a result of the move – making existing property owners the main beneficiaries.
The changes, which took effect at midnight yesterday, shave £1,739 off the tax bill for the average £211,980 first-time buyer home. A young couple buying a property worth £300,000 will save £5,000.
For homes worth up to £500,000, first-time buyers will now not pay stamp duty the first £300,000.
As a result, stamp duty has been halved on a £400,000 property, falling from £10,000 to £5,000. On a £500,000 property the bill falls from £15,000 to £10,000.
However, stamp duty rates remains unchanged for first-time buyers on properties worth more than £500,000.
Jeremy Duncombe, a mortgage expert at insurer Legal & General, said: ‘This is a promising move from the Government which will no doubt be welcomed by thousands of younger buyers across the country who are struggling to get their foot on the housing ladder.
‘For too long stamp duty has stood as just another barrier to home ownership – another cost to overcome – but with this exemption the path to owning a home has been made just that bit easier.’ Jeremy Leaf, former chairman of the Royal Institution of Chartered Surveyors, said: ‘The reduction in stamp duty is hopefully just the tonic the market needs.
‘This should have a knock-on effect on transactions right throughout the market and the overall economy.’ The Chancellor’s stamp duty break took effect from midnight yesterday, meaning the exemption has applied to anyone completing a deal since then.
Unlike the stamp duty holiday between 2010 and 2012, where first-time buyers did not have to pay on tax on homes worth up to £250,000, the new exemption is permanent.
Mr Hammond was warmly congratulated by Damian Green (left) and Mrs May after his speech in the House
To qualify, buyers need to be purchasing a home for the first time and have never previously owned a share in a property in the UK or abroad. In cases where couples are buying together, both partners must meet these requirements.
Despite the move being hailed by experts, the Office for Budget Responsibility predicted that the changes would help just 3,500 more first-time buyers get on the ladder.
Others warned that if the change pushes up house prices, it will merely serve to line the pockets of home owners selling to first-time buyers. In a separate Budget move, the Government is bringing in measures to prevent someone going through a divorce paying higher stamp duty rates that are supposed to apply to landlords and holiday home owners.
Since April last year anyone buying a second home has had to pay a 3 per cent stamp duty surcharge.
Couples can now apply for an exemption if one continues to live in a jointly-owned family home and the other buys a new property.
Builders who hoard land are warned: Use it – or lose it
By John Stevens, Deputy Political Editor
Developers could be stripped of land if they fail to build homes on plots where planning has been granted.
Philip Hammond said he was calling time on firms that profit from hoarding land and pledged to increase the number of homes built each year to 300,000.
Big housebuilders, which have been accused of deliberately sitting on plots to restrict the supply of homes and drive up prices, immediately saw their stock market valuation fall.
Mr Hammond said he was seeking ‘the biggest annual increase in housing supply since 1970’.
He promised £15.3billion in financial support over the next five years – taking the total to at least £44billion.
This includes £1.2billion for the Government to buy land to build more homes, and £2.7billion for infrastructure that will support housing.
Planning rules will be reformed to encourage better use of land in cities and towns, while also protecting the green belt. Mr Hammond announced an urgent review to investigate the problem of housebuilders snapping up land where planning permission has been granted and then leaving the sites undeveloped for years.
‘One thing is very clear: there is a significant gap between the number of planning permissions granted and the number of homes built,’ he said.
‘In London alone, there are 270,000 residential planning permissions unbuilt. We need to understand why.’
The inquiry, which will be chaired by former Tory minister Sir Oliver Letwin, will report back ahead of the spring financial statement.
Mr Hammond said that if the review ‘finds that vitally needed land is being withheld from the market for commercial reasons’, then ministers will intervene. He raised the prospect of using compulsory purchase powers if necessary.
Barratt Developments fell 3.7 per cent on the stock market, while Persimmon Plc dropped 1.9 per cent, and Berkeley slipped by 2.25 per cent.
However, Mr Hammond last night faced embarrassment as it emerged a property firm he founded has been accused of failing to develop land where it has been granted permission.
Castlemead Limited, which was started by Mr Hammond in 1984, builds homes, nursing homes and doctor’s surgeries.
Mr Hammond resigned as a director before he joined the Cabinet in 2010, but a trust of which he is the main beneficiary retains a controlling stake.
Castlemead Group, a company majority-owned by Castlemead Limited, was given planning consent to build four detached houses on a site near Wrexham, north Wales, in June 2010, on condition work began within five years. The company was granted a further five-year extension last year, but the site remains undeveloped.
Chancellor Philip Hammond set out an optimistic view of Brexit, but admitted that growth forecasts had been slashed
Local residents have complained the site has become overgrown and infested with vermin, and attracts misbehaving youths.
Mr Hammond is understood to have had no direct involvement in running the company since 2010.
In the years before the financial crisis, Mr Hammond and his wife were paid dividends of as much as £1.8million a year.
According to the firm’s website, Wrexham-based Castlemead is ‘dedicated to a single ideal – the creation of luxury homes and healthcare developments of character and distinction, designed to marry the best of modern building technology with the unchanging values of traditional craftsmanship’.
It adds: ‘Each development is fashioned in the uncompromising pursuit of excellence by a team of dedicated craftsman committed to the values and standards of a bygone age, while using the technology and materials of the new millennium.’
A spokesman for Mr Hammond said: ‘Any shares in Castlemead are held in a trust. The chancellor has no direct influence or involvement and so is unable to comment.’
Castlemead did not respond to a request for comment.
Government figures show that 217,350 new homes were added to the English housing stock in 2016/17 – the highest since the financial crash of 2007/08.