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Potential Tory stamp duty proposal would help 80% of first-time buyers – Zoopla

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  • 10/06/2024
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Potential Tory stamp duty proposal would help 80% of first-time buyers – Zoopla
The Conservatives’ reported pledge to keep the stamp duty threshold at £425,000 for first-time buyers could help the majority of prospective homeowners in England, data showed.

Over the weekend, reports came out suggesting this initiative would be included in the Conservative Party’s manifesto. 

The current stamp duty threshold for first-time buyers means the tax is not liable for residential property purchases up to the value of £425,000. This was brought in by former Chancellor Kwasi Kwarteng during the mini Budget as a permanent measure, then later made temporary by his predecessor Jeremy Hunt who set a closure date of March 2025. 

After this date, the threshold was set to return to its usual limit of £300,000 for first-time buyers. 

 

Most first-time buyers to benefit 

According to research by Zoopla, if this comes in it would help 80% of first-time buyers in England. 

Its analysis showed that this was the proportion of first-time buyers searching for homes worth less than £425,000 on its website in the last six months. 

Some 15% of hopeful homeowners search for homes worth between £425,000 and £625,000, so would pay partial stamp duty. 

Currently, homebuyers must pay 5% tax on the portion of their purchase between £425,001 up to £625,000. 

Just 7% of first-time buyers are in search of a home worth £625,000 or more and would therefore have to pay full stamp duty. 

Richard Donnell, executive director at Zoopla, said: “A return to the old rules and price thresholds would have seen 30% of first-time buyers paying stamp duty once again. 

The primary challenge for first-time buyers remains the need to afford higher mortgage rates and pass mortgage affordability tests. For many, this means injecting more equity into home purchases to reduce the level of income needed to buy.   

“Building more homes at a wider range of price points and developing a market for long term fixed-rate mortgages are the key building blocks to help first-time buyers long term.” 

 

More stamp duty reform needed 

Other industry figures welcomed the potential move. 

Nick Sanderson, CEO of Audley Group, said: “Permanently cutting stamp duty for first-time buyers isn’t the innovative reform that is needed. And it serves as a reminder of policymakers’ blinkered focus on one end of that housing ladder. Which is wrong and disappointing.  

“Stamp duty reform is needed but it would have more impact if focused on stimulating movement at the top of the market, freeing up existing housing stock. At the same time must come the prioritised delivery of age-specific properties. A minimum of 50,000 new units are needed every year to keep up with the ever-rising demands of the ageing population, and incentivising their move also helps those lower down the ladder.” 

He added: “The new government, whoever that might be, has a chance to make positive and lasting changes to the UK housing system. Let’s hope they get that right come July.” 

David Hannah, group chairman of Cornerstone Tax, said: “Stamp duty land tax payment bands have been long overdue for an overhaul as they have never been index-linked to house price inflation. An increase to these thresholds would stimulate activity at the lower end of the property market and allow first-time buyers to reduce the amount they need to borrow, thus improving their affordability calculations. 

“As we all know, a rising tide lifts all boats, those looking to purchase properties on the mid-to-high end of the property market will now have a chance to sell their low-end properties as a result of the increase in demand from prospective buyers, contributing to further momentum within the housing market.” 

Last week, Chancellor Hunt pledged there would be no increase to the level or rate of stamp duty.

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