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How will the stamp duty cut impact affordability issues and market activity? – Jefferies

by: Vikki Jefferies, proposition director at Primis Mortgage Network
  • 12/04/2023
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How will the stamp duty cut impact affordability issues and market activity? – Jefferies
Although mentions of the property market were noticeably absent from the Chancellor’s Spring Budget, cuts to Stamp Duty Land Tax (SDLT), as announced in the Autumn Statement, will remain in place until 2025.

The tax cut has been granted in a bid to support those looking to buy a home, as it will see no tax paid on properties up to the value of £250,000, whilst the level at which first-time buyers begin paying stamp duty is now £425,000, up from £300,000 previously.  

However, will it actually provide any needed respite for prospective buyers with affordability concerns?  


Affordability remains a barrier to first-time buyers 

According to the government, the stamp duty cut could support an additional 200,000 buyers.  

Longer term however, this may contribute to an increase in house prices by stimulating demand – which, in turn, could exacerbate affordability issues already being experienced by first-time buyers.  

Indeed, it is true that the stamp duty cut may support some homeowners who have already built up a deposit. However, those who have not yet done so or who do have the support of bank of mum and dad, for example, may still find it hard to get onto the housing ladder. This is especially true given house prices are rising at a faster rate than wages.  

Data from Nationwide shows us that house prices have increased by more than 60 per cent over the last 10 years. However, over the same period the wage of an average full-time employee in the UK has only risen by roughly a quarter, reaching £33,000 in April 2022.   


A need for new homes 

Equally, the failure to build more new homes will also contribute to rising house prices. New housing supply is currently lower than the government’s ambition of 300,000 new homes per year, with 216,000 new homes built in 2020/21.   

With demand continuing to outstrip supply, the affordability issue will continue until more is done to address it.  

Against this backdrop, the absence of the Help to Buy scheme is sorely felt and it would have been encouraging to have seen new incentives for first-time buyers included in the Spring Budget to complement SDLT cuts.  

However, brokers should note that lenders are constantly innovating, and there is an increasing variety of products being made available tailored to those with more unconventional financial circumstances. These include products which offer more relaxed affordability criteria and greater flexibility. 

Whilst the stamp duty cut may have a positive impact on those who already have a deposit to buy a home, it’s likely that it alone will not have the desired impact on affordability for first-time buyers.  

As a result, brokers have a key role to play in offering first-time buyers tailored advice, helping them to navigate the increasingly varied array of solutions available and to find one that works for the individual circumstances of each. 

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