Commercial awareness is a vital skill for any prospective law graduate. With that in mind it pays to always keep informed of current events and changes in government policy. One major event in which new policies are announced, and on which students should keep an eye on, is the yearly budget.
Earlier this month Philip Hammond, the Chancellor of the Exchequer, presented the Autumn Budget to Parliament and one of the key announcements was the immediate abolition of Stamp Duty for all properties up to £300k bought by first-time buyers. In addition, properties valued up to £500k will be entitled to have the first £300k Stamp Duty free and pay 5% on the remaining sum.
Is this a step in the right direction to provide solutions for the UK’s current housing crisis?
Yes and no.
First time buyers in London are most likely going to gain the biggest advantage where property prices average around £400k. This means first time buyers purchasing a property valued at £400k will now pay £5k Stamp Duty, whereas previously they would have paid £10k. This 5k saving is clearly a significant amount for a first time purchaser. In contrast, in the North the average house price for a first time buyer is around £125k. This results in a measly saving of approximately £25! Other areas of the country where property prices are around £150k – £200k, such as the Midlands and the South of England, save a more reasonable amount of £800 – £1,600.
However, the Office for Budget Responsibility (the government’s independent finance forecaster), advises the changes to Stamp Duty are likely to push property prices up by about 0.3%. This is not a welcome forecast as it appears to add another hindrance to first time buyers trying to get onto the property ladder. High deposits are the main culprits impeding first time buyers from owning their first homes, and not Stamp Duty. With the increase in property prices the changes bring, it is only going to make gaining a suitable deposit that much harder.
Ultimately the tax break is a Christmas present come early for those who are currently at the stages of exchange, or close to it, as they will have their deposit and funds already. Those who are still in the process of saving for their first home would do well to delay their celebration of a tax cut, and instead keep their eyes on the prices of houses over the coming months.
Catherine Howell – OULS Reporter