According to Skipton Group’s Home Affordability Index report, by the end of 2027, this is expected to grow to 42.4% of local authorities where first-time buyers will have to pay stamp duty due to the change. This was attributed to house price increases.
From 1 April, the first-time buyer stamp duty threshold will change from £425,000 to £300,000, which will add £6,250 to the cost of buying a home above this amount.
In Scotland, where they have the Land and Buildings Transaction Tax, the proportion of local authority areas with average first-time buyer properties liable to the tax stands at 34%, a rise from 3% in 2018. This is forecast to rise to over 40% by the end of 2027.
Static LISA threshold will impact usage
Skipton noted that the Lifetime ISA (LISA), which is a government-backed product launched in 2017 to help people save a deposit to buy a property of £450,000 or less, may struggle to be used.
Aldermore Insights with Jon Cooper: Edition 5 – Feeling enthusiastic about next year’s run-of-the-mill market
Sponsored by Aldermore
The report said that by the end of 2027, the proportion of local authority areas where the average first-time buyer house price exceeds the LISA threshold will grow to 10.2%.
Skipton warned that this could render thousands of LISA savers unable to use the product to buy a home and they would risk a 25% withdrawal penalty if they tried to access their savings.
This is a rise from 3.6% in 2017, when the LISA was introduced, and compares to 5.2% of local authorities currently.
The research showed that if the LISA threshold had increased in line with average first-time buyer property growth, then the limit would currently stand at £600,000.
Just over a tenth of potential first-time buyers can get on the property ladder
Skipton said around 11.5% of potential first-time buyers can afford to take the first step on the property ladder in their local area, which is a slight rise from 11.2% on the prior quarter.
There is also significant regional variability, with 31% of possible first-time buyers in Aberdeen City able to get on the property ladder, compared to just 2.7% in Ceredigion and Powys in Wales at the other end of the spectrum.
The report found that the proportion of potential first-time buyers spending more than 45% of their income on essential housing costs, such as rent, came to 39.7%.
This compared to 6.5% for owners with a mortgage and outright owners at 3.1%.
It stated that around 43% of potential first-time buyer households with an income over £73,100 – which puts them in the top 25% of UK households – can afford to get onto the property ladder based on their financial situation.
This compares to less than 1% of households with an income under £23,400.
Stamp duty first-time buyer threshold should be kept and LISA threshold upped
Stuart Haire, Skipton Group’s CEO, said the first step onto the property ladder “remains by far the hardest”, as almost 90% of potential first-time buyers across Great Britain are unable to afford to get on the property ladder without additional help.
He continued: “Today’s analysis shows that this chronic lack of affordability is about to get even worse. The upcoming stamp duty reforms, due on 1 April 2025, will further hurt first-time buyers and government schemes designed to help more people onto the housing ladder – such as the Lifetime ISA – risk becoming as obsolete as a fax machine if house prices continue to grow.
“We know the public finances are tight, but we urge the government not to move the goalposts and exacerbate the pain already being felt by first-time buyers. We are calling on the government to maintain the current nil-rate stamp duty threshold of £425,000 for people buying their first home, and to uprate this threshold in line with inflation each year. We also want the government to raise the LISA threshold to a minimum of £500,000 and to reduce the 25% withdrawal penalty to 20% to ensure savers can get back what they paid in.”
Haire said that, across the country, the firm sees first-time buyers “doing all they can to be in the best position to afford a home of their own: working hard, saving what they can, and making use of government initiatives designed to help them into their own homes”.
“Despite these endeavours, monumental barriers stand in their way – barriers that can and should be removed,” he concluded.
