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Cutting stamp duty for cheaper homes likely to have greatest impact – Bamford

by: Patrick Bamford, business development director at AmTrust Mortgage & Credit
  • 24/01/2020
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Cutting stamp duty for cheaper homes likely to have greatest impact – Bamford
With the Budget date now set for 11 March, we can expect the clamour for stamp duty reform to get louder and louder during the intervening period.

 

If Boris Johnson and Sajid Javid stay true to their word, then some significant change is likely to be on the way, potentially cutting stamp duty to nil for all those purchasing properties up to £500,000, although this is unlikely to be mirrored by any changes to those purchasing additional properties.

Perhaps the most they can anticipate is a cut to the extra three per cent levy they have to pay, although I would not hold my breath.  

While changes at the top threshold – over £1m properties – have also been mooted, I suspect it will be those lower down the valuation scale that will cause the most interest and might result in the biggest catalyst for the marketplace.

 

First-time focus 

Previous stamp duty changes have tended to focus specifically on first-time buyers, but it would be somewhat odd if this government – with its newly-acquired hefty majority – did not look to do something that incentivised a far greater purchasing demographic.  

What that might mean for properties valued between £300,000 and £500,000 between now and March however is anyone’s guess – will there be a stalling of this part of the market while all stakeholders wait for these anticipated changes? It’s likely given historical precedent. 

In the lead up to the General Election, there was a lot of talk about further support for first-timers and the recent stats appear to show positive movement in terms of numbers at least.  

Latest figures from the Yorkshire Building Society suggest the number of first-timers in 2019 had breached the 350,000 mark again for the second year running, putting the number of new purchasers ever closer to pre-credit crunch levels. Back in 2006 first-time buyer numbers edged past 400,000. 

Might that goal be in mind for this government? Again, perhaps, but I suspect it will feel that any movement upwards is going to be accepted and welcomed by the marketplace.  

Moving Help to Buy to a purely first-timer-based scheme is also on the horizon, and therefore it might believe that support should be more focused on the second-steppers, or maybe, helping those in retirement move out of larger properties which are too big for them and could be utilised more by families.

 

Encouraging downsizers 

There has been a lot of market chatter about how the government might use stamp duty to incentivise downsizing in this part of the market, but this could be a rather technical change and might well open a can of worms.

For example, how might you define downsizing? And why should stamp duty incentives be open to those of a certain age, but not for example, someone downsizing because they are selling the family home after a divorce?  

The government might not want to over-complicate a system of taxation which many believe is already very difficult to understand, especially when it is unclear just how many older homeowners will feel a stamp duty saving would be enough to put their home onto the market anyway. 

Overall, I expect the Budget to herald some stamp duty change – it would be a real surprise for this government to step back from it now, given the noise it was making last year.  

A lower level cut to nil might well be seen to have the greatest impact in terms of boosting purchase transactions – and, let’s be honest, the market could certainly do with such a boost. It would provide real political capital and perhaps go some way to taking minds off Brexit. 

 

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