24 November 2017
irst time buyers will benefit from the Government’s decision to abolish stamp duty even if house prices rise, the Institute for Fiscal Studies has said.
On Wednesday Phillip Hammond used his Budget to hand first-time buyers a stamp duty cut with those purchasing homes worth up to £300,000 now fully exempt. Those buying properties worth between £300,000 and £500,000 will receive a partial discount.
Last night critics warned that the policy would end up making home ownership more difficult for young people after the Office for Budget Responsibility said it would cause house prices to rise by 0.3 per cent. But yesterday Robert Joyce, director at the IFS, said the stamp duty cut would make owning a home more attainable for the younger generation. He said: “Housing is an asset. If it’s more expensive to buy, it’s also more valuable to hold it and more lucrative to sell it. “There will be some housing not otherwise in reach which will become in reach because larger deposits mean people can secure larger deposit.”
And separate analysis from investment firm AJ Bell showed that first time buyers can now use a combination of the new stamp duty relief and the Lifetime ISA to pay for 10 per cent of their house purchase. However there are fresh concerns that the £500,000 limit, above which first time buyers must pay full stamp duty, will distort the housing market. It could create a “bunching” effect for up to 30,000 sellers a year, the Office for Budget Responsibility warned. This is because first-time purchases of homes just above the limit will result in a 50 per cent tax hike for buyers of homes even £1 above the limit. Under the new rules stamp duty of £10,000 is owed on the purchase of a £500,000 property by a first-time buyer. This compares to £15,000 for a £500,001 property.