New research suggests that changes in stamp duty thresholds introduced last year, affecting first home purchases, has benefited around three quarters of first time buyers in England.
Since the change was introduced by the Chancellor of the Exchequer in November 2017, the analysis by Reallymoving has assessed first time buyer activity and it has shown that those buying in London and the South East have saved the most due to the higher prices.
Last November the Government scrapped stamp duty for first time buyers on properties up to the value of £300,000, while those spending up to £500,000 now pay no stamp duty on the first £300,000 and 5% on the remaining amount.
Following this change, stamp duty is either reduced or completely avoided by 75% of first time buyers in England.
The report explains why the benefit has been felt most by buyers in London and other southern regions where house prices are higher, because the changes have reduced the up-front costs that first time buyers previously had to pay.
In regions where house prices are cheaper, it was a rarity for first time buyers to exceed the previous stamp duty threshold of £125,000. 93% of first time buyers in the South East made savings, whereas only 39% did so in the North East.
A further breakdown of the data shows that in the year to November 2018, £119 million worth of stamp duty was saved by first time buyers in London – a 28% share of the overall amount. This was followed by the South East, where buyers saved 25% or £106 million of the overall share.
By contrast, first time buyers in the North East enjoyed just 1% of the savings, worth £5 million.
Despite the huge share of the savings enjoyed by London-based buyers, nearly three quarters of those who have made savings on stamp duty are still paying a reduced amount. Additionally, over 20% of properties bought by first time buyers in London exceeded the new £500,000 threshold, meaning they did not qualify for any stamp duty relief, even under the new rules.
As a consequence of high house prices in the capital, over a fifth of first time buyers in London in the last year spent over £500,000 on their first home, thereby not benefiting at all from the changes.
‘The Government’s stamp duty giveaway for first time buyers has had little effect in the Northern regions, with the impact broadly increasing the further south you go,’ said the firm’s chief executive officer Rob Houghton.
‘The Government recognised the impact of regional house price variations when it introduced Help to Buy regional caps in the recent Budget, yet stamp duty continues to be applied nationally, remaining a major barrier to thousands who are buying in higher value locations,’ he pointed out.
‘Consequently, first time buyers in the south of England still have some serious saving to do to cover the up-front costs of buying their first home, but the majority are paying less than they did under the old system. Alongside other schemes such as Help to Buy ISAs and shared ownership, 2018 has been a great year to get on the housing ladder,’ he added.