First time buyers relief at Hammond’s stamp duty cut

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.

Young professional couple: ‘We were put off by extortionate fees’

Young professionals Sophie Diaz and Heinrich Schroder could save £5,000 when they buy their first home as a result of the cut in stamp duty.

The couple – who currently rent separately in London – have been looking to buy their first property together. However they were put off by ‘extortionate’ stamp duty fees and the prospect of finding a large initial deposit.

Their budget is up to £400,000, at which price stamp duty would have previously set them back £10,000.

But the Chancellor’s abolition of stamp duty on the first £300,000 of the property’s value now means the fee would be halved – making it easier for them to get on the housing ladder.

Miss Diaz, 26, who works as an assistant underwriter at Zurich, said: ‘We knew there would be something in the Budget to help first-time buyers but we didn’t expect this much of a help.

‘It will make a huge difference and it is a relief knowing we don’t have to pay the extra tax on top of the house price.

‘We’re fed up of wasting money on rent and now that the initial buying cost has been cut we’ll hopefully be able to buy somewhere soon.’ Mr Schroder, 27, a financial manager at Deloitte, added: ‘It’s great news. The cuts make it a lot more affordable for first-time buyers, mostly young people like ourselves.’

Miss Diaz currently pays £715 per month, excluding bills, for a room in a three-bedroom flat in Tooting, South West London.

Meanwhile Mr Schroder is renting a room in a flat in East London, where he pays £750 with bills included.

They have been looking for a suitable place to buy for over six months. However they had even begun to consider moving abroad as they were finding house prices in London prohibitively expensive.

Mr Schroder added: ‘Your first property is a good investment and now we can look forward to properly searching for somewhere knowing that we’ve been given a bit of a break.

‘We love South West London – but we might also look in places where the present costs are a bit lower but where there is a bit of growth predicted.’

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

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.

Aspiring teacher: ‘£5,000 savings will go towards my qualification’ 

Aspiring teacher Nicola Smith says the support for young buyers is ‘long overdue’.

The 26-year-old – who works part-time while gaining experience in a school – lives with her parents in Denton, Manchester.

Rocketing house prices and stamp duty have so far prevented her from buying her own place.

But she says the pledge to invest in new homes and cuts to stamp duty are just what young people have been waiting for. ‘It’s great to see that the Chancellor has thought of first-time buyers in the Budget,’ she said.

‘Our generation either has to rent or live with their parents in order to make ends meet, and something needed to be done to stop that.

‘Growing up most of us imagined we’d have our own place at this age, but in reality it’s just not possible unless you have a large lump sum in savings to begin with. The deposit for a house is big enough as it is, without adding the extra stamp duty on top. The changes mean that people like me will finally be able to seriously think about getting our own place.’

Miss Smith is looking to buy a property closer to the city centre, where house prices are an average of £300,000. Changes in the Budget mean she will avoid paying stamp duty fees of up to £5,000 – money she will be able to put towards a PGCE teaching qualification.

She added: ‘It might not sound like much but it will really make a difference. I’m glad that there has also been an increase in tax-free personal allowance – it all adds up.’

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

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.

Five garden towns could be built in Oxford-Cambridge ‘corridor’ 

By Daniel Martin, Policy Editor

Five new garden towns are to be built to provide millions of new homes.

The Chancellor said the developments would help tackle the shortage of housing which was preventing young people getting on the property ladder.

The pledge forms part of the Chancellor’s ambitious plan to increase the construction of new homes to 300,000 a year by the mid 2020s – up from 217,000 last year.

Mr Hammond said he wanted to see the construction of a million new houses between the university cities of Oxford and Cambridge and the new town of Milton Keynes.

He said: ‘We need to look beyond this Parliament, to long-term measures.

‘We will use new town development corporations to kick-start five new locally agreed garden towns in areas of demand pressure.’

He said the towns would be ‘delivered through public-private partnerships designed to attract long term capital investment from around the world’.

He backed plans for one million new homes in the Cambridge-Milton Keynes-Oxford corridor by 2050, including new road and rail infrastructure in the region.

Mr Hammond said: ‘As a down-payment on this plan, we have agreed an ambitious housing deal with Oxfordshire to deliver 100,000 homes by 2031, capitalising on the global reputations of our two most famous universities and Britain’s biggest new town to create a dynamic new growth corridor for the twenty-first century.’

To reach his target of building 300,000 new homes a year by 2025, Mr Hammond said the Government would provide at least £44 billion of capital funding, loans and guarantees over the next five years.

The idea of garden cities originated in the late nineteenth century, and the first example of what would become a worldwide movement was Letchworth in Hertfordshire. Designed to combine the best of urban and country living, and surrounded by greenbelt land so that its growth is limited, it contains Britain’s first roundabout, built in 1909.

The movement became popular in the middle of the twentieth century. One of the most well-known examples is Welwyn Garden City, while the new towns of Milton Keynes and Telford were inspired by it.

The idea was revived by the Coalition government in 2014 with announcements for new garden towns at Ebbsfleet Valley in Kent and an expansion of Bicester in Oxfordshire.