Prior to the Budget last week property professionals had hoped that the current stamp duty holiday for first-timers buying property up to £250,000 might be continued.
With inflation higher than the savings interest rates and strict lending criteria this has caused low first time buyer numbers, but these were starting to ease. Over the previous 6 months with inflation falling and lenders becoming more flexible in their lending criteria the cessation of the stamp duty holiday is seen as a blow to the property market.
The challenge to first-time buyers is while having to save sufficient funds to provide a deposit on the property and the legal fees and disbursements they now have to save the stamp duty, in addition, thereby delaying any purchase chain of which they might form part.
The importance of first time buyers as the first link in the property chain and therefore as a driver to the rest of the market cannot be understated. The government should be doing everything possible to encourage first-time buyers and allow them to encourage the rest of the market.
Market commentators will draw on the statistics provided by lawyers about matters that completed in the run up to the cessation of the holiday as an indicator that the continuation was warranted.
Given that it appears necessary to the health of the property market, what will replace the stamp duty holiday?
Builders are considering incentives to the sale price of their properties to encourage first-time buyers to buy with them and avoid having to save but this has its own problems. Incentives reduce lending as the lender will factor them when considering the maximum amount that they will lend.
Lenders are considering using ‘stamp duty’ devices for first-time buyers to increase loyalty to their brand. A lender has created a product that will enable first-time buyers who save with them to obtain a cash-back of up to £2,000 if they save with the lender for 6 months or more. Whilst this will work the product is likely to be a short-term approach as it will be too costly for a commercial lender.
In the end, the best outcome was that the government would continue the holiday and spread the loss of stamp duty tax revenues across the stamp duty collection process and value bands. However, the government seems to have some difficulty with tax policy when balancing public finances rebalancing with encouraging growth.