With both major political parties promising stamp duty reform ahead of the election, what does it actually mean for the electorate and wider property market.
Labour announced plans to introduce a ‘Freedom to Buy’ scheme as part of its election manifesto, the detail of which is due to be published this week. In the Conservative party manifesto, launched at Silverstone on Tuesday, Rishi Sunak described the party as the defenders of the ‘property owning democracy in this country,’ announcing their intentions to reintroduce the Help to Buy scheme and abolish stamp duty for first-time buyers on properties worth less than £425,000.
At the current average house price of £375,131, an average home mover (not first time buyer) is paying £6,256 in Stamp Duty. Property portal Rightmove report 28% of homes currently on the market are priced at below £250,000 and are therefore exempt from stamp duty (unless purchased as a second home). 62% of properties listed on the portal are exempt from SDLT for FTBs
Zoopla’s own analysis of search trends show 80% are looking for homes priced under the current £425,000 threshold. Their analysis shows the South East and London FTB’s would benefit least from any extension of the nil rate band at £425,000, 34% and 15% respectively, whereas FTBs in the North East (100%) and Yorkshire and Humberside (99%) would benefit most.
Richard Donnell, Executive Director at Zoopla says
“Our analysis of what first-time buyers are looking to buy on Zoopla shows 8 in 10 would pay no stamp duty if the current measures were made permanent. The greatest beneficiaries are those looking to buy across southern England where up to half of first-time buyers are looking to buy homes priced between £250,000 and £425,000. We find that 7% of first-time buyers would still pay full stamp duty, most of whom are looking in London and 15% would pay partial stamp duty.
A return to the old rules and price thresholds would have seen 30% of first-time buyers paying stamp duty once again. The primary challenge for first-time buyers remains the need to afford higher mortgage rates and pass mortgage affordability tests. For many, this means injecting more equity into home purchases to reduce the level of income needed to buy. This impacts buyers across southern England where house prices are highest and average deposits are over £60,000
Building more homes at a wider range of price points and developing a market for long term fixed-rate mortgages are the key building blocks to help first-time buyers long term”
FTBs saved an average of £3500 per property according to HMRC statsic for 2022/23 with 203,300 claiming first-time buyer relief. 150,000 FTBs paid no stamp duty at all while 53,000 had to pay partial stamp duty for the purchase price above the current tax-free threshold of £425,000 up to a maximum of £625,000.
According to Rightmove the percentage of properties that are on the market by the current different stamp duty bands are as follows:
- £250,000 and below – 28% of properties
- £250,001 to £925,000 – 63% of properties
- £925,000 – £1.5 million – 5% of properties
- Anything above £1.5 million – 3% of properties
