How 2017’s Stamp Duty Cut’s affect the UK Property Market

Stamp duty land tax cut 2017

On the 22nd of November 2017, Chancellor of the Exchequer, Philip Hammond presented his first Autumn budget to parliament. The budget covers a range of different areas including housing, stamp duty, pensions, tax avoidance and much more.

This article will provide a general overview on how the changes to stamp duty land tax (SDLT) might influence real estate agents, cash house buyers and other property related sectors but we’ll focus on the how the changes to (SDLT) will affect first time buyers.

Stamp Duty Cut 2017 - The Pro's & Con's

As you can tell there a number of pro’s & con’s to the said change in stamp duty. Let’s look at these a little closer.

Pro’s to the stamp duty cut

  1. Homes under £300,000 will pay no stamp duty: Pretty simple really, the cut allows first time buyers to save more money which means they will have more cash available for their deposit.
  2. Homes between £300 – 500,000 will pay only 5% stamp duty: If you can afford a property in this price bracket then money is probably not much of an issue. You still end up paying less tax duty because of the changes to stamp duty that occurred in April 2016.
  3. The stamp duty cut will free up extra cash for first time buyers: As mentioned earlier the cut in stamp duty will allow first time buyers to save money. This is especially useful for buyers on low incomes & smaller deposits.
  4. The increase in cash will allow first time buyers to get on the property ladder a little easier: Again, more money equals more savings so it’s easier for people to buy.

Con’s to the stamp duty cut

  1. An influx of buyers will lead to increased property prices in the long run: If more people are buying homes, there is a high possibility that over time property prices may increase.
  2. More buyers also means the core issue of not enough homes being built in the UK will further increase property prices: Everyone involved in Britain’s property sector is well aware of the long standing issue which is not enough homes are being built in the UK. If there are more buyers it will only continue to shoot up property inflation.
  3. The savings made on stamp duty will eventually be added onto property prices resulting in no savings at all: If property prices do increase, the savings first time home buyers will make from the cut will be useless as they are paying more for the property itself!
  4. Home owners could start to exploit the supply & demand of houses in the UK & begin to charge more for their homes: Homeowners notice trends & so do estate agents. If the number of buyers increase & property prices go up, any decent estate agent would recommend to their clients that they increase the price of their home as the market is busy and they can get more for it.

So there you have it – the pro’s & con’s for the stamp duty cut! But what do some of our industry experts think about the budget in general and the change in stamp duty?

One things for certain, the current mood within Britain’s housing market is not one of optimism.

In fact, according to the Telegraph, the chief executive of the National Housing Federation, David Orr believes Hammond’s budget has failed to deliver the ‘bold‘ changes that are required to help rejuvenate and fix Britain’s housing crisis.

To summarize, according to Orr, the key points mentioned in the budget are a step in the right direction which combined may see help see a small growth but in his own words:

None of it is bold enough

David Orr

Previous change to stamp duty

In April 2016 there was a change in stamp duty land tax. These changes however only really affected landlords who purchase buy-to-let or additional properties. Another change in stamp duty so soon came as a bit of a surprise to some.

Property experts & politicians alike suggest the change in stamp duty was aimed at the younger generation in the hope of winning back their votes from Labour and making their dream of being able to purchase a home a little more realistic.

Affects of the stamp duty cut

The stand out point to the change in SDLT is “abolishing stamp duty land tax on homes under £300,000 for first-time buyers” but does it come with any consequences?

At first glance it looks like a nice and easy way to help first time buyers get on the property ladder and we’re positive it will help – but not so much in the long run.

After a while there is a very high possibility that the extra savings people make on the stamp duty cut will be made void by property inflation. This is due to the on going & long term problem Britain’s housing market is currently facing – There are simply not enough new homes being built!

We believe the cut in stamp duty & the budget overall are a step in the right direction, however, more needs to be done in order to lift Britain out of it’s housing crisis.

The bottom line is:

Not enough UK houses are being built so the supply & demand for homes is always fluctuating resulting in a very unbalanced market.

We’d love to hear your opinions! If you enjoyed our article visit our home owners advice center for more of the same. If have any questions or would like to give us some feedback, feel free to contact us at any time or leave a comment below!

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