Stamp duty cut for first-time buyers at heart of plan to tackle housing crisis
The main gainers from the Government's cut in stamp duty for first-time buyers will be those who already own a home, the Office for Budget Responsibility (OBR) has said.
It said the consequence of introducing the relief would be to increase house prices, with the effect of a permanent relief greater than a temporary one.
The abolition of stamp duty for first-time buyers purchasing homes under £300,000 is at the heart of a package of Government plans to tackle the housing crisis.
The Government said the moves will save £1,660? on the average first-time buyer property.
The OBR said: "The main gainers from the policy are people who already own property, not the FTBs (first-time buyers) themselves."
Housing experts said while first-time buyers will be cheering, the moves will not unblock the whole of the housing chain, including home movers, such as people wanting to downsize to a more suitable property.
It could also lead to some house sellers digging their heels in on price when dealing with first-time buyers and pushing up prices in high-demand areas, it was suggested.
Sarah Beeny, owner of estate agent, Tepilo.com, said she believes the move is unlikely to make much difference to the housing market overall.
She said: "A reduction in stamp duty for second steppers and downsizers would make a much bigger difference, allowing people to move up and down the market more freely and cost-effectively - and freeing up first-time buyer and family homes for the right people."
Jonathan Harris, director of mortgage broker Anderson Harris, said: "It might enable a first-time buyer to purchase a new sofa but will it really make the difference between being able to buy a home or not?"
Mark Hayward, chief executive, NAEA (National Association of Estate Agents) Propertymark said the move will increase the demand for first-time buyer properties - "and if we don't have the supply it will push prices up.
"We have seen this in areas where Help to Buy is offered."
Paula Higgins, chief executive of campaign group the Homeowners Alliance, called for a stamp duty cut for downsizers.
She said: "Freeing up larger family homes is essential for the fluidity of the market but there is currently no incentives to downsize and a lack of suitable properties to move to."
Under the measures announced in the Budget, stamp duty land tax (SDLT) has been scrapped altogether on homes under £300,000 for first-time buyers.
The Government said 95% of first-time buyers who pay stamp duty will benefit - and 80% of people buying their first home will pay no stamp duty.
First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000.
They will pay the normal rates of stamp duty on the price above that.
There will be no relief for those buying properties over £500,000.
Andrew Montlake, director at Coreco Mortgage Brokers, said: "Many of our first-time buyer clients will be cheering this change from the rafters as they calculate the savings that they will make on buying their first property and for some this could well be the difference between purchasing a property or not, especially in high-demand areas like London."
But he added: "However, this change does not help home movers who are increasingly being put off moving due to spiralling costs and the important downsizer, the last-time movers who will free up valuable housing stock and help unblock the system."
Jeremy Raj, partner and head of London residential property at Irwin Mitchell Private Wealth, said: "Changes to stamp duty land tax rarely work entirely in the way governments intend them to.
"This could lead to some prices going up, and sellers digging their heels in on price when dealing with first-time buyers - working exactly against what it intended to do. Plus more sales can lead to house prices going up, if demand outstrips supply."
Chancellor Philip Hammond has said around 300,000 new homes a year need to be delivered.
Government figures show 217,350 new homes were added to the English housing stock in 2016/17 - the highest since the financial crash of 2007/08.
The Government said the aim to add 300,000 new homes a year is an amount not achieved since 1970.
It has also promised £15.3 billion in new financial support for housebuilding over the next five years - taking the total to at least £44 billion.
This includes £1.2 billion for the Government to buy land to build more homes, and £2.7 billion for infrastructure that will support housing.
Changes to the planning system aim to encourage better use of land in cities and towns, while protecting the green belt.