First-time buyers looking to take advantage of low house prices have been given until the end of this year to avoid stamp duty if they are spending £175,000 or less on a property.
A three-month extension of the previously announced stamp duty holiday for cheaper properties was one of the few measures aimed at stimulating the housing market in yesterday’s Budget.
Property buyers previously had to pay 1 per cent stamp duty on purchases over £125,000. This was raised to £175,000 for 12 months in last September’s pre-Budget report and will now remain at that level for an additional three months, until the end of 2009. Stamp duty of 3 per cent is charged on properties that sell for £250,000 and 5 per cent for those over £500,000.
There was no attempt in the Budget to address the lack of high loan-to-value mortgages and brokers said the chancellor’s pledge to boost mortgage lending by an extra £20bn this year was a small proportion of what was required.
“The stamp duty holiday is to be extended to the end of the year, which will help some first-time buyers who are struggling to get on the housing ladder,” said Melanie Bien, director at Savills Private Finance, the broker. “But in not extending the exemption to all properties, the chancellor missed an opportunity to boost the housing market.”
Estate agents said the measure would do little, if anything, to stimulate the market, particularly in London where very few properties would benefit from the exemption.
“Even in a struggling economy, there are very few properties available within London under the £175,000 threshold,” said Lee Watts, managing director of Kinleigh Folkard & Hayward, the estate agent. “So first-time buyers in the capital won’t really benefit.”
Mr Watts pointed out that fewer than 5 per cent of the properties KFH is currently selling would benefit from the stamp duty break.
The government said 60 per cent of properties in the UK would be exempt.
Agents also pointed out that the stamp duty holiday had had little effect on the market in the seven months it has been in operation.
“The dwindling number of mortgage approvals over the past year is proof that it didn’t make a difference in September when it was introduced,” said Peter Rollings, managing director of agent Marsh & Parsons.
The main hurdle to a recovery in the housing market is widely considered to be the lack of mortgage finance available rather than the affordability for first-time buyers.
The National Association of Estate Agents said there was huge demand for property that was being frustrated as potential buyers could not find finance.
The chancellor tried to address this by guaranteeing £50bn of new mortgage-backed securities – mortgage debt that is rolled up and sold on to third-party investors. These new guarantees should free up finance for new lending and help kick-start the housing market.
Ms Bien felt this move was “crucial and long-awaited”. “There is not enough lending being done by balance sheet lenders – the reopening of the securitisation market is vital in encouraging more lenders to lend, not just the small handful that are part-owned by the government,” she said.
However, she questioned whether £50bn was sufficient to help smaller lenders as well as the big banks.
Measures were also announced to stimulate housebuilding, which has ground to a halt as the market has soured.
The chancellor freed up £600m that will be used to unlock stalled housing sites and deliver up to 10,000 more affordable and shared equity homes in England over the next two years.
Richard Stone, director of affordable housing broker, SPF Sherwins, said this did not go far enough as it only supports people who want to live in new-build properties.
