At Andell Property, we’re looking closely at what effect the recent Stamp Duty changes will have on the property market and if this could have a positive impact on property development across the UK.

What was the change?

In the latest budget, Stamp duty was abolished for first-time buyers buying a home of up to £300,000.

Chancellor Philip Hammond has said this meant 95% of first-time buyers would see stamp duty cut, while 80% would pay none at all.
In addition to the stamp duty announcement, Mr Hammond also pledged £44 billion in capital funding for housebuilding and a reform of planning laws in urban areas as the Government aims to build 300,000 homes a year by the mid-2020s.

Higher capital funding, loans and guarantees, plus measures to boost the supply of skills, resources and land, would add up to £44bn.

“First-time-buyers should think about acting quickly to take advantage of this stamp duty ban, before the extra demand it creates pushes up prices and starts to eat away at the extra cash this stamp duty exemption will free up,” says Rightmove director and housing market analyst, Miles Shipside.

The Government has already put buy-to-let landlords on the back foot with its three per cent stamp duty surcharge, so this extra advantage of no stamp duty or lower stamp duty on purchases over £300,000 gives first-time-buyers the additional support they need to get on to the property ladder.

What are the possible effects of this change?

1. First-time buyers

Abolishing stamp duty for most first-time buyers would undoubtedly make it easier for them to get a foot on to the property ladder.

According to Fairview New Homes, a real estate developer in north London, the chancellor’s decision to reduce the stamp duty burden for first-time buyers purchasing properties of up to £500,000, would be “a game-changer for those trying to get on the property ladder in the capital”.

2. London is an entirely different market

In London a £300,000 budget won’t stretch far enough for most, so the stamp duty changes won’t have as much of an effect. Conversely, the increased stamp duty for properties over £1million means many in London can’t afford to progress, so where are all of these first-time buyer homes going to come from? The London property market is clearly the driving force behind the entire economy and if it slows, then it can prevent transactions elsewhere.

Mr Hammond has added that, in London and other property hotspots, stamp duty would be axed on the first £300,000 of a purchase price up to £500,000 – a cut of up to £5,000.

3. Stamp duty vs deposits

A deposit for a new home is obviously a much larger up-front cost for most first-time buyers than the Stamp Duty. The average deposit across the UK is £32,899, according to Halifax, compared to the average Stamp Duty charge of £1,654.

Martin Walshe, head of new homes for Cheffins says, “Any help we can give to first-time buyers to alleviate the burden of finding high deposits as well as footing the bills for all other moving costs should be considered. The issue in the main however, is the actual pricing of homes coupled with the severe lack of affordable property and unfortunately, cutting stamp duty cannot help that.”

Darius Ziatabari, co-founder of Equinox Living says, “Along with the continued Help to Buy scheme, the abolition of stamp duty for first-time buyers up to £300,000 will be very effective in terms of boosting activity. However, it would also be wise for the government to address a reduction in stamp duty in properties over £1million, as well as the excessive levy on buy-to-lets, which has crushed liquidity in these markets.”

4. Planning permissions vs housing starts

A Commons review found that a key issue with the housing market is the big gap between planning permissions and housing starts.
“There was a total of 270,000 residential planning permissions which remained unbuilt in London this year”, the Chancellor said.
The Independent reported in November that the big developers have been accused of exercising an iron grip on the pace of housebuilding, with no commercial incentive to build faster unless prices are on the rise.

However, developers have rejected accusations of land-hoarding, insisting delays are often caused by a cumbersome planning system and failures by local authority planners. In the likely event that the new stamp duty changes will encourage the first-time buyer’s market, hopefully this would reduce land hoarding as a result.

5. Property Developers

This year, property developers have drawn up research to prove the case that by lowering stamp duty for first-time buyers, this will have a positive effect on the market.

Speaking to The Sunday Telegraph at the Mipim conference in Cannes, Rob Tincknell, who heads up the Battersea Power Station Development Company, said, “At the top end of the market, transactions have plummeted since the higher rate of stamp duty was introduced. Adding that increasing the duty for more expensive homes also hit homes at a lower price because people were put off moving.”

The theory is that as stamp duty is one of the key blocks on the sale of homes then its removal for first-time buyers should encourage the housing market as a whole to improve.

Our Opinion

It is still early days since the new changes came into effect. The new stamp duty rates, alongside the increased help-to-buy scheme in London, means first-time-buyer demand is surging. This translates into even more demand for new homes across London and the rest of the U.K. which in our opinion, can only be good news for property developers who are able to take advantage of these changes.