Stamp duty concessions on house purchases are set to be cancelled in a move that add up to £15,000 to the cost and risk killing a first-time buyer boom, it has been claimed. The net effect of the changes will see the percentage of first-time buyers paying no stamp duty fall when buying a first home from 80 percent to 60 percent, according to analysis by experts at Hargreaves Lansdown.
At the same time, the percentage of this group paying partial stamp duty will double from 14 percent to 28 percent. Cuts to stamp duty were implemented by the Liz Truss and Kwasi Kwarteng Budget in September 2022, however the last Conservative Chancellor, Jeremy Hunt, announced that these would come to an end in April next year.
It is understood that Chancellor Rachel Reeves will press ahead with this move in a decision that will add thousands of pounds to the cost of buying a home. The concessions announced in the Truss budget meant there was no stamp duty for first-time buyers on the first £425,000 of a property’s value. And this applied to all homes worth up to £625,000.
However, this is expected to revert back to an original regime where the stamp duty threshold for first-time buyers will come back down to £300,000 and only apply to properties worth up to £500,000.
Hargreaves Lansdown said 2024 has been a huge increase in the number of first-time buyers, but it fears the removal of the stamp duty concessions will bring this momentum to an end.
Its head of personal finance, Sarah Coles, said: “This is the year of the first-time buyer, as the horror of renting is persuading more tenants to take the leap into home ownership.
“Rents have been driven up and mortgages rates are dropping, so that owning a typical first-time buyer home is now 17 percent cheaper than renting.
“Escaping the rental trap is no mean feat. Lower mortgage rates mean that once they’ve built a deposit, their monthly outgoings can be much lower. However, the real challenge is building a deposit at the same time as paying sky high rents.”
She said many young buyers have relied on a combination of support from family members and sacrifices in the name of saving can make a huge difference.
It said saving through a Lifetime ISA (LISA) can also be a lifeline when it comes to buying a property as it offers a 25 percent government bonus worth up to £1,000 a year.
But Sarah Coles said young buyers will need all this help and more from April “when there’ll be a new barrier to buying”.
She added: “We’re currently coming to the end of a stamp duty holiday – ushered in by the mini-Budget as a permanent change and then given an end date by Jeremy Hunt. It means there’s no stamp duty for first-time buyers on the first £425,000 of a property’s value – which applies to all homes worth up to £625,000.
“We’re not expecting Rachel Reeves to mention this in the Budget, let alone extend it. It means the stamp duty threshold for first-time buyers is expected to fall to £300,000 and only apply to properties worth up to £500,000.
“The percentage of first-time buyers paying no stamp duty would then drop from 80 percent to 60 percent, and the percentage paying partial duty will double from 14 percent to 28 percent.”
Hargreaves Lansdown said speculation that the Budget will raise Capital Gains Tax on the profits made on property has seen a rush of property investors to put second and third homes up for sale in order to avoid being hit.
Sarah Coles said: “It means the extra buyers hitting the market have plenty to choose from, so we’re seeing the number of sales rise rather than prices.”
Experts at the property sales portal Zoopla said the end of the stamp duty holiday “would be more keenly felt in southern England where the average FTB in London and the South East would pay £5,600 and £1,390 respectively, compared to £0 today”.
It added: “In parts of London such as Camden, Hammersmith and Fulham and Islington with average house values over £600,000, FTB could pay an additional £15,000 in stamp duty. Faced with higher buying costs, FTBs will want to pay less for homes in these areas which will keep price rises in check.”
Chief executive of the estate agent body Propertymark, Nathan Emerson, said: “We hope that this week’s Autumn Budget will be used as a springboard to improve housing supply. Propertymark has long argued that Stamp Duty reform is one way to do that, especially for those wishing to downsize.
“When the Bank of England’s Monetary Policy Committee meet on Thursday next week, we hope to see further progression on potentially cutting interest rates as this will continue to improve the overall health of the economy.”
