The government’s decision to slash stamp duty for first-time buyers will mainly benefit sellers by pushing up property prices, according to the Office for Budget Responsibility (OBR).
The OBR – the independent body in charge of analysing the public finances, said the abolition of stamp duty on up to £300,000 of a property’s purchase price meant house prices would go up by twice the amount saved by the buyer by the tax cut.
This is because it is a permanent measure rather than a temporary holiday, the OBR stated.
It means potential tax receipts to the tune of £560m in 2018 to 2019 – which would otherwise have gone to fund projects such as schools and hospitals – will instead be used to subsidise the private housing market.
Chancellor Philip Hammond announced the measures in today’s (22 November) Budget as a means of helping younger people get on the housing ladder.
But David Hollingworth, associate director of communications at London & Country, gave his support to the chancellor’s move.
He said: “That is going to remove one of the barriers for people struggling to get a deposit together.
"It is good that he has not brought in a temporary holiday, because in the past that has done little to accelerate decisions. To freeze it for higher-value properties makes sense as well.”
Daniel Bailey, principal at Derbyshire-based Middleton Finance, also welcomed the move, pointing out it will save first-time buyers money that can be spent on furnishings and other outlays.
He said: “The worry is that estate agents and sellers will factor that in to the purchase price – that is the downside. But on the surface, it is positive news for first-time buyers.
“The impact is an unknown quantity, really. We have had lots of forecasts and I don’t know how many are correct.
"It will help a lot of people, especially people who are completing their house purchases now.”
Tom Selby, senior analyst at AJ Bell, pointed out that the stamp duty cut favoured those in the south of the country.
He said: “The saving based on the average house price for first-time buyers in the UK will be £1,654. However, this more than doubles in the south east to £3,839 and in London it would be £5,000.
“Whereas, in the north, the average house price for first-time buyers barely exceeded the previous stamp duty threshold so the benefit for many people will be almost non-existent.
“The average deposit for a first-time buyer in the UK is £32,899, so the stamp duty saving of £1,654 will only represent around 5 per cent of their deposit.
"While that will help, it is difficult to see how this is going to fundamentally change the affordability of house purchases for first-time buyers.”