Mortgage brokers have called for a stamp duty holiday for first-time buyers (FTBs) as record numbers are hit by the property transaction tax.
The proportion of first-time buyers paying the property tax has surged from 47 per cent in 2001 to 78 per cent in 2017, according to Lloyds Bank research.
It comes as the average first-time buyer house price reached a record high of £207,693 in 2017, incurring a stamp duty charge of £1,653.
In Greater London, where the average first property costs almost £410,000, 100 per cent of first-time property buyers now pay stamp duty, along with 98 per cent of those in the south-east.
Andrew Montlake, director at London-based Coreco Group, said: “I think in general it seems unfair to add to the costs for first-time buyers' with stamp duty and I would like to see this removed for this section of the market, certainly up to a certain level.
“This is definitely a move that could help prospective buyers to get on to the market, but we have to be careful that this will not just simply boost house prices further.
“Some lenders have been good with a wide range of products that can be used to assist first-time buyers and more cashback products of course help, although this generally means that the rates offered are higher.”
In 2010, the coalition government ended stamp duty on homes under £250,000 for those just getting onto the property ladder for a two-year period.
Reforms introduced in December 2014 led to the tax being paid on the amount above certain price thresholds rather than on the total value of the property, with the aim of ensuring those purchasing lower-value properties paid less.
Nevertheless, residential stamp duty revenues surged to a record £8.56bn in 2016, driven by rising house prices across the UK.
Jane King, mortgage adviser at London-based Ash-Ridge, said she would be a huge supporter of a reduction or stamp duty holiday for first-time buyers.
"A UK-wide one would be fair, although I appreciate that many properties in parts of the UK sell for below £125,000, so perhaps the threshold could start at a higher amount – say £300,000.”
The Lloyds Bank statistics show the only region where fewer than half of first time buyers pay stamp duty is the North, where the figure is 41 per cent.
Daniel Bailey, principal at Derbyshire-based Middleton Finance, commented: “The stamp duty costs are not going to be as high as in the London area, so a little bit would help – but I don’t see the government doing it because they are going to lose revenue, and at the moment they are doing quite well out of revenue.
“First-time buyers are what we need in the market. The financial impact is not going to be massive where I am, but it would be welcome.”
Ray Boulger, senior technical manager at London-based John Charcol, said he would welcome assistance for those just getting onto the property ladder, but thought the government could go further and cut the tax across all property bands.
“The stamp duty is 1 per cent on a chunk between 125,000 and 250,000 – it is not a massive hurdle for first-time buyers,” he explained.
“Any extra cost is a hurdle, but a much bigger issue is finding a 5 per cent deposit. The real way to help first-time buyers is to facilitate mortgages that don’t require a 5 per cent deposit.”
He added that this did not need to be 100 per cent loan-to-value mortgages, but that they could stretch to 97.5 per cent.
Mr Boulger continued: “There is clear evidence that higher end rates are affecting transactions. The number of properties above £2m changing hands is down by two-thirds compared to a year ago. Clearly, it is having a serious impact on moving.
“For a more typical person thinking of moving in London, it is a big additional cost. Instead of moving, people are choosing to build extensions and basement conversions.
“If stamp duty were to be cut, would that stimulate economic activity? More people moving means more activity in the market and more VAT being paid, along with more choice and more competition. I think we need to look at the bigger picture.”
A HM Treasury spokesperson commented: “A vast majority of homebuyers now pay less tax when buying a home, thanks to our stamp duty reforms.”
“We are helping more people buy their first homes with generous government support from the Help to Buy and Lifetime Isa schemes. In addition, the £2.3bn Housing Infrastructure fund will free up over 100,000 properties in high-demand areas.”
simon.allin@ft.com
