The Government is considering slashing the tax payable by first-time buyers when they take their first step onto the property ladder, according to reports.
Stamp duty has soared over recent years as house prices have spiralled, with many warning that the bill is a major barrier for first-time buyers and a huge extra expense for buyers of larger homes – meaning they stay put and clog up the housing ladder .
Now the Evening Standard reports Conservative backbench MPs are lobbying the Chancellor Philip Hammond to offer first-time buyers a stamp duty holiday as part of sweeping measures to entice younger voters in the Budget on 22 November.
Philip Hammond is due to give his annual budget speech on 22 November
It follows backlash against another Tory proposal to slash pension tax relief for older workers to fund a giveaway for the younger generation touted earlier this week.
There are also whispers about a major move on writing off student debt – an idea thought to have the support of Brexit Secretary David Davis, who previously campaigned against rises to tuition fees.
A cut in stamp duty would save younger buyers thousands of pounds on the purchase of their first home, especially in areas of the country where property prices are high.
Currently, anyone buying a home worth more than £250,000 must find an extra 5 per cent of the property value in cash to settle their stamp duty bill with the HMRC.
According to the Land Registry, the average price paid by first-time buyers in London is now £428,546 – meaning a £11,427 stamp duty levy.
Even on a property worth £250,000 buyers face a £2,500 stamp duty bill on top of their deposit, legal and valuation fees and moving costs.
Richard Donnell, of property research firm Hometrack, said: ‘Any move by the Government to reduce the impact of stamp duty on housing market activity and potentially offer savings amounting to several thousand pounds for first-time-buyers is welcome.
‘However, stamp duty is just one consideration impacting the ability of first-time buyers to access the housing market. Mortgage affordability testing remains a major hurdle for renters looking to transition into home ownership as well as stamp duty.
‘This measure is likely to provide modest support for first-time buyer demand but with limited impact on house prices.’
In areas of the UK where house prices are not so high, stamp duty is less of a barrier for would be buyers, but in the South East and other pockets where property values have soared, it can cripple those trying to get on the ladder.
The number of first-time buyers in London has fallen by 12 per cent since 2014 to 42,400 in the past 12 months.
London’s share of first-time buyer property purchases is down to 12 per cent, the lowest level since 2000 and before that 1991.
Donnell said numbers have fallen as a direct result of rapidly rising house prices, which have pushed up deposit requirements to an average of £70,000 for a typical first-time buyer home in the capital.
Figures published this morning by the Office for National Statistics showed that in England house prices increased by 5.3 per cent over the year to August 2017, with the average price in England now £244,000.
Wales saw house prices increase by 3.4 per cent over the last 12 months to stand at £150,000.
In Scotland, the average price increased by 3.9 per cent over the year to £146,000. The average price in Northern Ireland is currently £129,000, an increase of 4.4 per cent over the year to quarter two 2017.
House prices have risen steadily in the aftermath of the financial crisis in 2008
Paul Smith, of haart estate agents, said: ‘House price rises seem unstoppable – home buyers are having to pay a £11,000 more for their homes than the same time last year.
‘A likely interest rate rise in the coming months could mean a further surge, as buyers fight over limited stock in the run-up to Christmas, and look to lock down a cheap fixed rate mortgage before the Bank of England steps in.
‘However, as prices rise so does unaffordability – the government must finally act on a stamp duty cut for first-time buyers. Stamp duty is holding back a whole generation of young people already struggling to save for a deposit, and it is time to bring this injustice to end.’
He added: ‘For hardworking individuals who have to borrow for the basic cost of living, saving for both stamp duty and a deposit to own their own home is a far-flung reality. Especially as our branch data shows first-time buyer deposits are up 6 per cent on the month, outpacing inflation.’
Donnell warned that mortgage affordability tests that require that applicants can afford to pay a ‘stressed’ mortgage rate are worsening the problem for those seeking to buy their first home.
He added: ‘While the monthly cost of renting in London is more than the cost of buying at a mortgage product rate of 2.4 per cent, the cost of a mortgage at the stress rate of 7 per cent would require a renter to be able to afford housing costs that are 60 per cent higher than the cost of renting.
‘This creates a major hurdle for first-time buyers trying to access the housing market in London.’
Research from estate agents Savills shows four in five households are priced out of buying a bog-standard newly-built home in London and the South East because house prices are so high.
It claims that to be ‘affordable’ even to just 40 per cent of buyers a new-build property would have to cost £250,000 or less.
Andrew Montlake, of mortgage broker Coreco, said: ‘Stamp duty still acts as one of the blockages in the system and is one reason why many people do not move and free up housing for others.
‘That said, any change will not solve the issues that underpin the housing crises and the Government needs a proper long-term solution to the question of not enough affordable homes being built in the right areas for the right people.’
