When Philip Hammond introduced the new Stamp Duty policy on 22nd November 2017, the intention was to assist first time buyers with taking the leap into home ownership.
Under the new policy, first time buyers spending £300,000 or less on their property purchase will not pay stamp duty. If purchased between £300,000 and £500,000, stamp duty will not be paid on the first £300,000, meaning a reduced rate is paid. The maximum that a first time buyer is allowed to save under the new policy is £5,000, which would be the duty on a £300,000+ purchase.
A transaction worth £208,000, the average price paid by a first-time buyer, would previously have been liable for a stamp duty payment of £1,660 – but a first-time buyer will now pay nothing.
Philip Hammond has promised that the change in policy will have an immediate impact on the property market, with more than a million first time buyers set to benefit over the next five years.
The reduction of stamp duty, paired with a recent decline in demand, appears to have provided the perfect conditions for many first time buyers. Figures released by the NAEA (National Association of Estate Agents) in December stated that 32% of all sales came from first time buyers. This figure is a significant increase from the 27% in November.
The trade body for estate agents (NAEA) reported that overall demand for housing slumped in December, with 268 prospective home owners registered per member estate agency branch, down from 333 in November. That’s a fall of 20%. This has had an impact on the number of sales, which are down an average of five sales per branch in December.
Mark Hayward, chief executive of NAEA Propertymark explained, “What we don’t usually see is first-time buyers capitalising on this slump and using it to their advantage – 44% of our members think that the Chancellor’s stamp duty cut for first-time buyers will encourage more to make offers, and looks like that’s what we’re starting to see’’.
While first time buyers are benefiting, many home owners and estate agents are concerned. Those properties of higher value than £500,000 are taking considerably longer to sell and seeing far less viewings than we would expect. The hope is this trend is short lived and we are merely experiencing a slow start to 2018.