Stamp duty changes benefit buy to let more than first-time buyers ‒ Crystal Specialist Finance

Lots of changes to the housing market were announced as part of the mini Budget last week, with the Chancellor reducing stamp duty to zero on all property purchases up to £250,000.

This sounded good, but who will benefit from this change in reality?

With the average house price now standing at £286,397, based on the latest Land Registry figures, a typical homebuyer looking to purchase will still have to pay out almost £2,000.

As we all know, the average house price was indeed fuelled by the stamp duty ‘holiday’ during the pandemic, with the average house price before the pandemic standing at around £237,834.

Therefore, if this new measure had been announced back then, it would be unlikely that homebuyers would have had to pay the duty, but it wasn’t.

First-time buyers will still need to stump up significant deposit

So, what does this mean now?

With the stamp duty threshold for first-time buyers increasing from £300,000 to £425,000 and the average UK wage being £31,252 it would mean that a single person looking to buy their first home would be able to borrow £140,634 or 4.5x salary.

This would be £145,763 below the UK’s average house price.

Cutting the stamp duty in this price bracket to help first-time buyers enter the market is meaningless if you can’t afford to buy a property in the first place, unless, of course, they have a £145,000 deposit already in place.

Add inflation, interest rate rises, cost of living and rising energy prices and the prospect of owning a house becomes more attractive but less likely.

Buy-to-let landlord benefits

On the other side of the coin, it is welcome news for the buy-to-let market.

The three per cent additional stamp duty charge applies to purchase of additional property, such as a buy-to-let. So, in reality, this means a two per cent cut for landlords buying up to £250,000 results in a saving of £2,500 per purchase.

In addition, corporation tax is staying at 19 per cent, which will benefit portfolio landlords who have set up limited companies to alleviate changes to mortgage interest tax relief.

To put this into perspective, UK buy-to-let companies hold a total of 583,000 mortgaged properties, which is almost a third, 29 per cent, of all the outstanding buy-to-let mortgages.

So, who really benefits from the stamp duty changes?