Plans to permanently slash the home-buying tax were announced today by the Chancellor in the autumn Budget but some experts warn it could push up house prices
THE Chancellor scrapped Stamp Duty for first-time buyers in today's budget but some experts warn it could push up property prices.
The drop in the controversial tax for first-time buyers is on purchases worth up to £300,000 and it takes effect from today.
First-time buyers in London will be able to get the tax relief on the first £300,000 on properties worth up to £500,000.
This will save potential home-buyers up to £5,000 on the land tax, while 80 per cent of first-time buyers won't need to pay it at all.
It is unclear whether people looking to buy a property outside of London will also benefit from the scheme on the first £300,000 with a limit of £500,000.
The Chancellor Philip Hammond today outlined plans in the autumn Budget in a move that will help young people wanting to buy a home.
The number of people under 45 who own their own home has tumbled by a fifth since the Tories took power seven years ago.
Mr Hammond said: “It takes too long to save for a deposit and rent absorbs too much of the monthly budget.”
But some experts have warned that the cut for FTBs could push up property prices.
A spokesperson for the Office for Budget Responsibility said: "We estimate that the Stamp Duty relief will increase house prices by 0.3 per cent.
"So the main financial gainers will actually be people who already own properties, rather than first-time buyers themselves."
In a report it claims that Mr Hammond's tax relief will only actually help around 3,500 people stop renting and buy a home.
In 2008, the then Chancellor Alistair Darling temporarily suspended Stamp Duty for a year for properties costing less than £175,000.
But it didn't result in the boost for first-time buyers as they had hoped - pushing up property prices by 0.7 per cent.
Mark Hayward, chief executive of NAEA Propertymark, said: "This move will increase the demand for FTB properties and if we don’t have the supply it will push prices up.
"We have seen this in areas where Help to Buy is offered, as it attracts a great deal of interest from FTBs.
“In terms of the Government’s plans to build 300,000 new homes a year, it is yet another pledge to increase the number of new homes created.
"While we welcome this news, we have historically had these announcements from Government to accelerate housebuilding which has not been delivered. It is not a question of ‘how many’, it’s a question of ‘how’.”
HOW we calculate stamp duty under the current system in England depends on whether the property is your first or second home.
The current system in England for residential properties means:
For second homes or buy to let properties:
The government provides a to let you know how much you would pay on a property.
Today the Philip Hammond also announced a new £250,000 threshold for first-time buyers in 2010.
The Chancellor also pledged another £10billion for the Help to Buy scheme which helps people to buy a home with a five per cent deposit.
The government hopes to double the number of people the scheme helped get on the property ladder from 135,000 to 270,000.
In a bid to attract young voters, the government hopes that the break will give hundreds of thousands of first-time buys more of a chance to own their own property.
Stamp Duty land tax is a lump sum payment anyone buying a property or land over £125,000 has to pay.
The rate a buyer has to fork out varies depending on the value of the property.
Thanks to the high price of Stamp Duty, many people struggle to get on the property ladder because of the added cost of moving house.
The home-buying tax has prevented hundreds of thousands of houses from being bought or sold over the past five years, according to bank Santander.
The data suggested that there would have been an extra 146,000 property deals - more than 29,000 - between 2012 and 2017 if the controversial tax didn't exist.
Hannah Maundrell from money.co.uk commended the moved that will make getting on to the property ladder "slightly more affordable" but says it won't "solve the affordability gap" between property prices and wages.
A report has shown that millions of pensioners are unable to flog their large homes after they become too big for them because the rates put off younger buyers.
Paula Higgins from the Homeowners Alliance said that whilst it's good news for first-time buyers, it does not relieve pressure on older homeowners looking to downsize.
She said: "Freeing up larger family homes is essential for the fluidity of the market but there is currently no incentives to downsize and a lack of suitable properties to move too."
The study from the London School of Economics and the VATT Institute for Economic Research has advocated scrapping the tax completely.
The boffins claim that doing this would increase the rate of home moving by 27 per cent.
When speculation about the cuts began last week, economist Ben Southwood of the Adam Smith Institute, described the move as a "gimmick".
Adam, who recently proposed scrapping Stamp Duty altogether, said that Stamp Duty stops all homeowners from moving, not just first-time buyers.
He told The Sun: "If the housing stock doesn’t increase, then making it easier for one group to buy just makes it harder for other groups."
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