First-time buyers trying to save on stamp duty are hurting property market
STAMP duty changes are slowing down the first-time buyer property market because they are no longer buying flats, estate agents have said.
Rather than snapping up a smaller home, many are now choosing to wait and save for a larger property instead, in order to reduce their tax bill and maximise on the Government’s new stamp duty exemption, Mark Hayward, chief executive at the National Association of Estate Agents, has said.
By eliminating their “second step” from a flat to a family house, buyers will reduce their overall moving costs.
Under the stamp duty changes which came in to effect on Nov 22 last year, first-time buyers spending £300,000 or less on a property purchase will be free of duty.
For first-time purchases worth between £300,000 and £500,000 no stamp duty will be paid on the first £300,000.
The maximum amount first time buyers can save under the policy is £5,000, which is the duty arising on a £300,000 purchase. However substantial savings can still be made on less expensive homes.
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.
It follows reports that sales to firsttime buyers in 2017 were higher than any other year since the financial crisis.
But the start of 2018 saw sales for the group fall by 5 per cent, down from 32 per cent in December to 27 per cent in January. This is in contrast to the wider property market which saw overall demand for properties rising by more than a third.
Mr Hayward said: “Our members have noticed first-time buyers holding off on making purchases typically outside of London, and saving for longer to maximise the full stamp duty relief.
“They’re skipping the ‘first time home’ and moving straight on to their second homes, to avoid growing out of their property in four or five years and facing the cost of stamp duty.
“This is a smart move and an example of how first time buyers are making legislation work to their advantage.”
But Henry Pryor, an independent buying agent, warned first time buyers against putting off their purchase.
He said: “Do not put your life on hold and arrange your affairs around the idea that you can put off home buying in order to save a larger deposit at a time when mortgage products are at record lows.
“Our analysts expect rates to quadruple.”