Will the stamp duty reduction be BAD for new buyers? Critics warn that giving away taxes can breathe new life into buy-to-let investors and raise house prices
- Due to the Chancellor’s plans, 90 percent of homes will not pay stamp duty until March
- However, this also includes second home buyers, including real estate investors
- Labor has labeled the move as an “unnecessary subsidy” for landlords
Chancellor Rishi Sunak’s cut in opportunities came under fire today as critics warn that it will bring unfair benefits to second home buyers and landlords and that priceless house prices will continue to exist.
In an effort to boost the housing market, the Chancellor announced on Wednesday that most home buyers will not pay stamp duty on the first £ 500,000 of their home purchase from now until March.
This could potentially save homebuyers tens of thousands of pounds when they first move or buy, and has been widely welcomed by many home seekers and real estate market professionals.
However, critics have taken the step because they have also cut the tax on second home buyers, including landlords and investors.
The chancellor has raised the stamp duty threshold to £ 500,000, saving thousands of buyers
Labor housing secretary Thangam Debbonaire said, “It is unacceptable that the Chancellor tried to sneak this huge stop to second homeowners and landlords, while many were desperate for support.”
The conservatives, in turn, have accused Labor of “political scoring.”
In recent years, landlords have been hit by a cocktail of tax changes, including a 3 percent surcharge on second homes.
This was originally brought in to discourage landlords from buying homes that could be bought by new buyers. Earlier this year, This is Money revealed that hundreds of thousands of landlords have left the market in recent years as a result of tax changes in recent years.
And before the pandemic hit, a third of private landlords said they wanted to sell at least one home in the coming year.
But while they still have to pay the 3 percent surcharge, landlords will now significantly reduce their stamp duty bill when purchasing new real estate thanks to the measures taken by the chancellor.
Charlotte Nixon, mortgage expert at Quilter, says this week’s changes may reverse reversing landlord numbers somewhat.
She said, “Buy-to-let investors have left the market in large numbers in recent years. The stamp duty holiday may result in some of these investors being put back on the market.
“It remains to be seen whether the holiday will drive long-term demand for real estate, or just demand for preload as people rush to complete purchases while the lowered threshold is in effect.”
David Westgates said the holiday may see prices rise as demand increases.
“It is possible that between now and April next year we will have a boom scenario in which a disproportionate number of people will buy at higher prices, followed by softer prices when the scheme ends and asking prices are adjusted,” he said.
The real winners are undoubtedly buyers of higher value real estate who have just dropped £ 15k off their final bill, not the people it was meant for.
“Cliff edge deadlines completely disrupt the market and seldom benefit the consumer.”
How much do landlords save?
While many homebuyers, particularly in the South East and London, will undoubtedly benefit, the average landlord purchase will also bring big savings.
For example, as illustrated in the chart below, a second house of £ 400,000 will now carry only a stamp duty bill of £ 12,000 instead of £ 22,000.
While this is still £ 12,000 more than a standard home purchase due to the 3 percent surcharge, the landlord will still save £ 10,000 now, the same as a standard home buyer would by paying no tax at all.
Thangam Debbonaire, secretary of Shadow Housing, said:[Sunak] should focus on supporting those who need it, not helping people invest in owner-occupied homes and holiday homes.
“An unnecessary subsidy for second homeowners will only exacerbate the housing crisis by reducing the supply of housing in general.”
Conservative Party Co-President Amanda Milling replied, “It is a belief that Labor is against plans to help thousands of families across the country. Under our plans, 90 percent of people who get on the property ladder or climb the ladder pay no stamp duty at all. ‘
Where does most benefit from the cut?
Due to the structure of the stamp duty, some regions will benefit from the discount much more than others. Buyers in the South East and London, in particular, will see the biggest savings from high house prices in these areas.
|Region||Average property price||Stamp tax savings|
|London||£ 485,794||£ 14,289|
|South East||£ 323,353||£ 6,167|
|East of England||£ 291,254||£ 4,562|
|South West||£ 263,360||£ 3,168|
|West Midlands||£ 195,971||£ 1,419|
|East Midlands||£ 194,664||£ 1,393|
|North West||£ 166,202||£ 824|
|Yorkshire and the Humber||£ 159,208||£ 684|
|North East||£ 126,945||£ 38|
|Source: AJ Bell|
These two regions alone typically account for 70 percent of all stamp duty revenues.
In fact, the average London buyer could see a savings 37 times greater than a North East buyer.
As a result, experts expect austerity to have a much greater impact on the housing market in the South than in other areas.
Laura Suter, personal finance analyst at AJ Bell, said, “While the stamp holiday is meant to get the housing market moving, these numbers show it’s likely to be a much bigger boost in the already prosperous areas of London and South. east and will have a much more muted impact in other parts of England.
“Taking advantage of the opportunity to save less than a hundred pounds in tax is unlikely to be a big push to lure potential buyers out of the house hunt, while offering a thousands-pound tax break will have much more impact.”