Industry figures have warned that the government’s decision to cut stamp duty in the mini-Budget on Friday risks reducing the number of affordable homes available by placing upward pressure on house prices, with many agents wanting a greater focus on boosting housing supply, while others have welcomed the reduction to the unpopular levy, designed to stimulate greater activity in the housing market.
To recap, the government is reforming stamp duty by doubling the level at which people start paying this from £125,000 to £250,000.
The government says that it is also committed to helping first-time buyers get on the property ladder in two ways. Firstly, by increasing the level first-time buyers start paying stamp duty from £300,000 to £425,000.
In addition, the government is allowing first-time buyers to access the relief when they buy a property costing less than £625,000 rather than the current £500,000.
These measures will reduce stamp duty bills across the board for all movers by up to £2,500 with first-time buyers able to access up to £11,250 in relief.
Will Stevens, Head of Financial Planning, Killik & Co, said: “Stamp Duty is one of the UK’s least popular taxes but a significant revenue generator for the Treasury. Today’s announcement will be welcomed by millions who feel they have been trapped in their homes by the additional cost of living that it represents.
“The chancellor will hope that by removing this barrier, it will encourage more property transactions, increase affordability for first-time buyers, help those looking to downsize, and encourage more people to move for work.
“However, the real acid test will be in the impact on property prices as a whole, with supply still very much constrained.”
Nick Sanderson, CEO, Audley Group, commented: “A stamp duty cut is a tried and tested way to get the housing market moving. But it is a short-term fix for a housing market that has major flaws. The blanket reduction will only succeed in stimulating some parts of the market and ignores the desperate need for more targeted measures and increasing supply in areas of the housing system which are chronically underserved. This is where successive governments have fallen short and why the housing market doesn’t function as it should.
“The blinkered focus on first-time buyers largely neglects homeowners considering downsizing or moving into housing with care and this is an area that could have a significant impact on the whole market. Liz Truss and her government have an opportunity to make a mark on the housing market, but it seems it will pass as another opportunity missed.”
Vanessa Hale, head of Research at Strutt & Parker, said: There have long been calls for Stamp Duty reform. Rates have steadily increased since the late 90s, as a means to raise taxes and in response to rising house prices. Since 2009, the SDLT has raised over £125bn in tax revenues, assisted by the 74% increase in UK house prices over the same period.
“This has, however, made the housing market increasingly inaccessible for first-time buyers, who need to find the funds for even bigger deposits as values have risen, and ‘lost’ money on purchase costs. While the changes today sound attractive, we question the real impact they will have, especially following the further increase in the base rate yesterday and the price of mortgages rising further. There may have been a missed opportunity here to consider SDLT relief for homes with high EPC ratings in the face of the climate crisis.
“The Stamp Duty cuts, which tops out at £2,500 for those who are not first-time buyers in England and Northern Ireland, are unlikely to boost transaction volumes and help consumer confidence. However, the relief of up to £11,250 for first-time buyers will be welcome for those struggling to get on the housing ladder.”
Peter Higham, MD of Gascoigne Halman, remarked: “The announcement is very much welcomed by our industry and brings some much-needed continuity to the property market.”
Iain McKenzie, CEO of The Guild of Property Professionals, said: “Rising inflation, interest rate hikes and the cost-of-living crisis have taken their toll on the economy and the new chancellor is betting on tax cuts to stimulate growth.
“This mini-Budget comes after the Bank of England announced that Britain was now in recession, so the Government has once again turned to the housing market to become a catalyst for economic growth.
“The cut to Stamp Duty announced will be welcomed by people currently buying a house, but this will not solve the wider issue of affordability in the property market.
“As we saw during the pandemic, when you create incentives to buy, you see demand soar. As demand increases, the number of available properties falls, pushing house prices up. An increase in demand now would come at a time when the supply of housing is already low, with house prices already inflated beyond the budgets of many buyers.
“The housing market is intrinsically tied to the health of the economy. Home-movers spend an average of £12 billion a year on home-related purchases such as furnishings and renovation. Moving can benefit other aspects of the economy, so it is good to see action taken to energise the property market.
“The government needs to address the issue of housing supply by making home-building a priority. The review on planning systems for infrastructure announced today could go some way towards easing the supply issue, but it relies on the Chancellor’s pledge to ‘get Britain building’.”
Nick Leeming, Chairman of Jackson-Stops, commented: “There was nothing mini about the Chancellors Budget, which sends a clear message for the UK to pursue economic growth. History proves just how impactful a market wide cut to stamp duty can be. The rush to complete in June 2021 created fierce competition amongst buyers, and sellers reaped the rewards as house prices reached record highs. Today’s move will gently stimulate the lower end of the market, which in turn will create positive ripples up and down the many chains currently in motion.
“The consequences of stamp duty reform, however, will need to be addressed by the government too. Any spikes in transaction activity can create market bubbles, and most frustratingly for many purchasers, this can in turn create a backlog of completions. Transactions are already taking much longer than before. The risk of not addressing this in the coming weeks as the results of further market stimulation take effect, could see delays increase.
“At present, across our national network of offices, current pricing levels continue to tempt homeowners onto the market, with transaction levels up by 7.6% year on year, according to the latest HMRC data. Demand and supply levels also remain buoyant, with Jackson-Stops’ own data showing a 27% uptick in new instructions in August. We are seeing more ‘forever’ homes being bought earlier on in a buyer’s lifecycle due to the increased costs of moving, with muted stamp duty fees likely to increase market fluidity. It remains to be said however, that for many, quality of life remains the leading driver for moving home.”
Bobby Singh Braich, MD of Belvoir branches in Kettering and Corby, said: “The [stamp duty] cut will mean that first-time buyers, who up until today didn’t have to pay any Stamp Duty on the first £300,000 of a property’s value, can now purchase a property of up to £425,000 before paying any Stamp Duty.
“There is also good news for other homebuyers, with the threshold at which you need to pay Stamp Duty on a house purchase price doubling from £125,000 to £250,000.
“Personally, I think this is good news for the housing market and will hopefully help those looking to buy a property to find it more affordable in the current climate. The downside is how quickly this has been rushed through will create some headaches on purchases already going through.
“We all saw the positive impact of the Stamp Duty holiday during 2020/21 on the property market and look forward to seeing how this latest change makes an impact.”
Nathan Emerson, CEO of Propertymark, commented: “The rebalancing of the thresholds for which stamp duty is paid, in particular for first time buyers is long overdue to catch up with house prices which have risen at an extraordinary rate.
“We did hope that stamp duty for downsizers or last time movers would have also been reviewed to release the latter part of the market, which when blocked stops movement further down for second steppers and first-time buyers, causing stagnation as buyers have nothing to move on to.”
Brian Murphy, head of lending at Mortgage Advice Bureau, said: “This could turn out to be an excellent time to properly revisit the structure of stamp duty. Numerous governments have tinkered with it, but it tends to push up prices for a short period and then momentum generally mellows. It hasn’t been long since we last had a stamp duty break, and these things tend to generate momentum that causes a flurry of activity followed by a period of slowdown. However, the permanency of today’s announcement may temper a sudden surge of activity and allow some control of the UK property market to be regained.
“Still, the crux of the issue is that any changes in stamp duty will not address the main problem right now: a significant supply shortage.”
Stephen Ward, director of Strategy at the Council for Licensed Conveyancers, commented: “We don’t expect there to be a spike in activity like the one we saw with the pandemic SDLT holidays, but the same advice applies: Firms should always be careful to ensure that they manage workloads to maintain the highest standards of service and advice to clients.”
Gary Wright, co-CEO of flatfair, said: “Increasing demand through cuts to stamp duty, while having no meaningful plans to increase supply, is a recipe for yet more unsustainable house price rises. The pandemic proved this.
“Overvalued homes do not equal economic growth anywhere except on paper. The effects won’t be felt in wider society. If this government is serious about sharing the benefits of a high-growth economy, it would do well to mitigate the impact of the cost of living crisis on renters, who are often the most vulnerable in society. Reforming the tenancy deposit system to incorporate more than just a punishing traditional five-week deposit – which averages more than £2200 in London – would be a good start.”
Tom Bill, head of UK residential research at Knight Frank, said: “Just when you think housing demand is cooling, along comes another stamp duty cut. Together with other measures designed to boost the economy, a cut will intensify and prolong demand in the housing market. However, what the Chancellor is giving away, the Bank of England will more than take away. Many buyers will find the impact of rising mortgage rates soon eclipses the benefit of a stamp duty cut, which will keep firm downwards pressure on prices next year.
“The cost of a five-year fixed-rate mortgage has almost tripled over the last year and this upwards trajectory will continue. Almost four million first-time buyer mortgages have been issued since 2009, which is a large group of homeowners who don’t know what it’s like when monthly interest payments rise meaningfully. The gravitational forces of higher rates will bring house prices back down to earth irrespective of any stamp duty cut.”
Jason Tebb, CEO of OnTheMarket, commented: “The stamp duty reduction was highly anticipated and any measure which maintains momentum in the housing market is to be welcomed.
“First-time buyers are the lifeblood of the housing market so targeting them in particular with assistance that will help them onto the ladder is particularly welcome.
“Increasing the amount at which first-time buyers start to pay stamp duty from £300,000 to £425,000 is sensible given rising property prices, as is the increase in the value of a property on which first-time buyers can claim relief. The £500,000 limit ruled out many properties in London and the South East in particular whereas the new £625,000 limit will give buyers more leeway and ultimately increase their purchasing power.
“In addition, with the entry point at which stamp duty is paid increasing from £125,000 to £250,000 for all buyers, the new measures will mean that, according to the Chancellor, 200,000 more people won’t pay any stamp duty at all.”
Andy Shepherd, CEO of Dexters, said: “The Stamp Duty changes and the increase in threshold to £625,000 for first-time buyers announced by the Chancellor in the Mini-Budget will further assist many of them who are looking to get onto the housing ladder.
“Overseas students have returned to the capital in force and helped to boost the rental market. There is a fundamental shortage in housing stock for long-term rentals and with the increasing demand it has resulted in significant increases in rents in some local markets.
“Landlords continue to see London as a safe place to invest. However private landlords need to be incentivised to bring more long-term rental units into the market to ease the pressure on rents.”