A million first-time buyers are expected by the Government to benefit from the stamp duty cut over the next five years - but experts have warned there could be unintended downsides for the housing market.
When does stamp duty generally apply?
If you are buying property or land in England, Wales or Northern Ireland, you may need to pay stamp duty land tax (SDLT). The current threshold at which the change kicks in for homes is at £125,000. Stamp duty is set to be replaced in Wales in 2018.
What has changed in the Budget?
Stamp duty has been abolished for first-time buyers on homes under £300,000. 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. The relief applies if you, and anyone else you are buying with, is a first-time buyer. There will be no relief for those buying properties over £500,000.
How does the Government say the change will help first-time buyers?
It says around a million first-time buyers will be helped over the coming five years, with £1,660 saved? on the average first-time buyer property.
What do others say?
Some housing market experts predict that house sellers, knowing first-time buyers will no longer have to factor stamp duty into their costs, will be more bullish when pricing their own home and negotiate harder. It could also fuel demand in places where first-time buyer properties are already scarce - forcing house prices upwards. This could mean that while some first-time buyers no longer have stamp duty to pay, they end up having to pay a higher house price. The Office for Budget Responsibility (OBR) says the main gainers of the move will be existing home owners - and the impact will push house prices upwards. The OBR said the stamp duty tax cut was expected to boost the level of house prices by around 0.3% and most of the effect is expected to be in 2018. The relief would also distort the housing market for homes priced at around £500,000 the OBR has said. This could mean sales end up being bunched up at just below the £500,000 mark. The move could result in as few as 3,500 additional home purchases a year, according to the OBR.
What about other people trying to move who are not first-time buyers?
Some sellers of typical first-time buyer homes may now find it easier to move as they could have a wider choice of buyers. But housing market experts have said that people higher up the housing market chain, such as those looking to downsize, may still struggle to move as they will still have to pay the usual stamp duty rates.
When does the cut kickin?
It applies to people completing purchases on or after November 22.
How have buyers been reacting to the news?
There has been a mixed response. Writing on Twitter, one user said: "My solicitor has confirmed that we won't be paying stamp duty. I can't believe it. £600 we'd struck off as gone suddenly coming back to us, and right before Christmas!" But another user, who said they recently bought a property, said: "Slashing stamp duty a few months after I bought my first house is Hammond's biggest joke yet."