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Budget 2017: Stamp duty relief will drive up house prices, says OBR Budget 2017: Stamp duty relief will drive up house prices, says OBR
(about 3 hours later)
The stamp duty relief for first time buyers announced in the latest Budget is expected to drive up the cost of property, the Office for Budget Responsibility has said. Measures to abolish stamp duty for first time buyers have been criticised as nothing more than a ‘drop in the ocean’ for those struggling to get on the housing ladder, and are also expected to drive up the cost of property.
The OBR said that the move, announced by Philip Hammond on Wednesday, to scrap stamp duty for first time buyers of homes worth less than £300,000, is expected to boost house prices by around 0.3 per cent, with most of the increase happening in 2018. As part of the Budget, Philip Hammond on Wednesday announced that stamp duty will be scrapped immediately for first-time buyers of homes below £300,000.
Mr Hammond said the move would cut the tax for 95 per cent of first-time buyers – and abolish it altogether for 80 per cent of them. In London and other property hotspots, it will be axed on the first £300,000 of a purchase price up to £500,000 – representing a cut of up to £5,000.
In London and other property hotspots, stamp duty would be axed on the first £300,000 of a purchase price up to £500,000 – a cut of up to £5,000. The Chancellor said that the move would slash the tax for 95 per cent of first-time buyers and abolish it altogether for 80 per cent of them.
House prices have surged in recent years, especially in places like London, and while Wednesday move was broadly welcomed, many said that it would not provide enough support to make a marked difference to younger generations’ ability to get on the property ladder. But while some initially cheered the move, personal finance experts slammed it as a token measure and one that’s unlikely to offer significant relief to savers trying to buy their own home.
“While welcome, abolishing stamp duty is a drop in the ocean given the affordability challenge of getting Generation Rent onto the property ladder,” said Simon Heawood, chief executive and founder of property investment site Bricklane.com.“While welcome, abolishing stamp duty is a drop in the ocean given the affordability challenge of getting Generation Rent onto the property ladder,” said Simon Heawood, chief executive and founder of property investment site Bricklane.com.
“The focus on bridging the housing generational gap must lie on the all-important first rung of the ladder – saving up for a deposit. The issue of housing supply and price is important, but looking at measures to support Generation Rent’s ability to get together a deposit is crucial,” he added.“The focus on bridging the housing generational gap must lie on the all-important first rung of the ladder – saving up for a deposit. The issue of housing supply and price is important, but looking at measures to support Generation Rent’s ability to get together a deposit is crucial,” he added.
House prices have surged in recent years, barring many from being able to buy, especially as wage growth has stagnated.
The most recently available official data shows that annual house price growth across the UK stood at 5.4 per cent in September, up from 4.8 per cent in August.The most recently available official data shows that annual house price growth across the UK stood at 5.4 per cent in September, up from 4.8 per cent in August.
The average UK house price was £226,000 during the month, marking a 0.4 per cent increase on the previous month.The average UK house price was £226,000 during the month, marking a 0.4 per cent increase on the previous month.
Responding to Mr Hammond’s announcement, the OBR also said that the move would also likely have the effect of driving house prices up even more – by around 0.3 per cent, with most of the increase happening in 2018.
Polly Neate, chief executive of housing charity Shelter, also responded critically to the news.
“The stamp duty holiday focused on first time buyers sounds positive on paper but realistically, this will only help a very small number of people who have already been able to save enough for a deposit,” she said.
“For most young people, homeownership has become a pipe dream and the high cost of rents has made it difficult for them to save.”
Separately on Wednesday, Mr Hammond promised a wide-ranging spending package to boost housebuilding. He set a target of an annual 300,000 homes built by the middle of the next decade.
Higher capital funding, loans and guarantees, plus measures to boost the supply of skills, resources and land, would add up to £44bn, he said.
And the Chancellor adopted another Labour policy, with a threat of what have been dubbed “use-it-or-lose-it” powers to target developers who hoard land but refuse to build.
Big developers have repeatedly been accused of exercising an iron grip on the pace of housebuilding, with no commercial incentive to build faster unless prices are on the rise.
But they have resolutely rejected accusations of land-hoarding, insisting delays are often caused by a cumbersome planning system and failures by local authority planners.
New cash set aside for house-building will include a £630m small sites fund, £2.7bn to more than double the Housing Infrastructure Fund, £400m for estate regeneration, £8bn of new financial guarantees to support private house-building and an additional £34mn to develop construction skills, Mr Hammond said.
He defended the Government’s housebuilding record, claiming 1.1 million homes had been built since 2010, of which 350,000 were “affordable”, but also warned that the proportion of young homeowners had plunged from 59 per cent of young people to just 38 per cent over 13 years.
“We need to do better still if we are to see affordability improved,” he said.