Stamp duty cut triggers rise in first-time buyers but could this defer property market slump

The chancellor’s cut to stamp duty has prompted a surge in the number of homebuyers, leading to bidding wars and the number of homes being sold over the asking price reaching record levels.

Despite fears that first-time buyers would have the least to gain from the cut, as they are already exempt from the tax for the first £300,000 of any home costing less than £500,000, they are the group which has increased the most with a 45 per cent rise, according to analysis by Hamptons International.

In July, Rishi Sunak raised the threshold for paying the tax from £125,000 to £500,000 for those buying homes in England and Northern Ireland until March 31 next year, potential saving buyers up to £15,000 per property.

Countrywide, one of Britain’s largest estate agency chains has reported a 38 per cent increase in buyers. The biggest rises are in Scotland, the east of England, the southeast and London.

The increase in buyer numbers is creating a strong sellers’ market in which about 30 per cent of all sales are ending in competitive bidding with three or more prospective buyers. Places with high numbers of bidders are Yorkshire and the Humber, Scotland, the East Midlands and northwest England. In the northeast of England 31 per cent of homes go to competitive bids compared with 13 per cent this time last year.

David Hannah, Principle Consultant and Founder of Cornerstone Tax, commented on the announcement:

“Historically, Stamp Duty changes have been poor at manipulating the market but on this occasion, the cut has helped stimulate the market in the short term. However, and particularly after the 31st March 2021 cut off, it will not be surprising to see the market slow up considerably after that date.

“People are taking advantage of the situation right now but with these bidding wars up to the upper limit, it would not be surprising if many second-steppers are being squeezed out of the market. More needs to be done to help wean the market aware from these cuts and not nosedive, otherwise, the policy would have done nothing but defer the collapse of the residential market until 2021.”

Kindly shared by Cornerstone Tax

Main article photo courtesy of Pixabay