Advertisement

First-time buyers lose their advantage with stamp duty cut

Estate agent - WILL OLIVER/Shutterstock
Estate agent - WILL OLIVER/Shutterstock

First-time buyers could lose a crucial edge in the housing market after Rishi Sunak’s stamp duty cut boosted the hand of landlords and homeowners seeking to move up the ladder, the Institute for Fiscal Studies (IFS) has warned.

The tax break on properties worth up to £500,000 applies to all buyers - overriding a perk which allowed first-timers to pay lower rates than everyone else. The think tank warned that there will be more competition as result, pushing up prices and ultimately giving sellers the biggest boost.

Helen Miller, of the IFS, said: “When there is a tax break it can lead to the price of houses going up, so sellers can benefit.

“When the break was just for first-time buyers, it was more likely they would retain some of that benefit. Now it is across the whole market, it is more likely that prices will rise so first time buyers could be left keeping less of the discount that they normally have.”

However the IFS still praised the move and said it would boost the economy by powering up activity in the property market.

Stamp Duty Calculator
Stamp Duty Calculator

Ms Miller said: “A lot of the fiscal stimulus from this is not from people swapping houses, it is the activity around it - you move house, you renovate, you buy white goods, it is that which provides the fiscal stimulus.

“If you want to get the housing market going, this is the best measure to pick. Even in normal times stamp duty is a bad tax - it slows down transactions, so getting rid of it is a good thing.”

Under the new temporary change, stamp duty will not be charged on properties selling for up to £500,000 until March. It will save movers up to £15,000. Second home buyers such as landlords will still pay tax but at a lower rate than before.

Stamp duty used to kick in at £125,000 - but an existing perk meant first-time buyers only started paying at £300,000.

The IFS said the stamp duty policy should work by pulling forward housing transactions, as happened with a similar break in the financial crisis. However, experts said that ending it in March could be too soon as activity may simply collapse again.

Ms Miller said: “It means we could be seeing depressed housing sales at a time when the economy is still weak."