While the Budget may have delivered the much called for Stamp Duty holiday, it has still managed to catch people off guard. With the sudden change the worry was that this would translate into higher house prices, which is exactly what seems to be the prediction.
The Office of Budget Responsibility (OBR) has looked at the economic impact of the Budget and for the property market, it appears that the Stamp Duty is going to have an effect on house prices. The change isn’t too bad, but at a time when the Government are looking for more affordable house prices, the stamp duty isn’t helping first time buyers find cheaper properties.
Looking at the effect of the budget, the OBR has found that house prices are expected to rise by 15% between the second quarter of 2017 and first quarter of 2022. This is less than the 22% that they had predicted by March.
With the news of the Stamp Duty changes, OBR has revised the receipts predictions. 2017/2018 will be at £9.6 billion, rising to £11.7 billion by 2022/2023. Purchases that are second homes, and buy to let are expected to be around 23% to 24% of the total receipts per year. This is because the stamp duty changes are based on first-time buyers. It was also estimated that the stamp duty would cost the treasury £3.2 billion over the next five and a half years.
In London where the house prices are more expensive, the stamp duty change will have the biggest impact. While there are restrictions placed on stamp duty in the city, the more expensive properties will still bring in the tax.
One thing that was noted is that because the change is only for first-time buyers, this is good for property sellers for the prime market. There are no changes to stamp duty for them, and while this may sound like bad news, in fact it is more positive. The fact that there are no tax changes for the property market is actual welcome to the industry as there have been quite a few changes over the last few years.
While many wanted to see a more widescale stamp duty change, it comes as no surprise as the Government is focusing on first time buyers and trying to get them on the property market. This still leaves many worried that there aren’t many other changes for the market. One of the critics include London Mayer Sadiq Khan.
Khan noted that the changes did little for the city of London, and that at a time when housing is critical, not enough had been done. It should be noted though that although there was little in the way of help for just London, the Midlands and North did see changes to help promote the building of houses.
There needs to be a fine balance when it comes to helping the country as a whole, and while London as the capital does require plenty of help, it is a positive move to help the rest of the country. No doubt there will be more help for the capital in the near future.