So the Budget has brought a smile to the faces of first-time buyers across the UK with the news that from tomorrow, there will be no stamp duty for purchases of property up to £250,000 for the next two years.
But while Chancellor Alistair Darling was a bearer of good news to one part of the market, he also brought bad news to wealthy property buyers by announcing a new stamp duty band of 5 per cent for property costing £1m and over.
This change doesn’t start immediately – it comes into effect from 6 April 2011. No doubt the market will see a rush of property purchases before the higher stamp duty band comes into effect – part of the Government’s plan we assume.
The property and mortgage industry has welcomed the first-time buyer stamp duty relief after months of calling for an extension of the stamp duty holiday for property purchases between the value of £125,000 and £175,000 which came to an end last December.
According to figures from the Land Registry, about 78 per cent of property transactions in England and Wales would fall below a £250,000 stamp duty threshold. This of course varies significantly across the country from 93 per cent in the north-east of England to 48 per cent in London and 68 per cent in the south-east.
Figures from the Council of Mortgage Lenders show that about 91 per cent of first-time buyers bought property worth less than £250,000 in 2009 and that these buyers accounted for about 35 per cent of the total market.
However, many in the industry believe the government should have reformed the stamp duty structure rather than just introduce a new higher stamp duty band.
Melanie Bien of Savills Private Finance says:
Raising the top rate to 5 per cent over £1 million to fund this tax break simply underlines just how unfair the stamp duty system is because it is not tiered. A root and branch reform to make it fairer remains long overdue. It is at the top end of the market where the majority of transactions have been taking place, supporting the housing market. This may make homeowners think twice before moving.
What’s your view on the changes to stamp duty?