TBritish Chancellor Kwasi Kwarteng has announced a permanent reduction in stamp duty for property purchases in England and Northern Ireland – a move which included in a mini-budget critics say they will reward the rich more than those with lower incomes.
Below new system with effect from Friday, the first £250,000 of a property’s value will be exempt from stamp duty. Buyers will pay 5% of the home’s value from £250,001, while the portion between £925,001 and £1.5m will continue to be taxed at 10%. Any property worth more than that will be subject to stamp duty at 12%.
The threshold at which first-time buyers start paying stamp duty will rise from £300,000 to £425,000 and the maximum value of a property where first-time buyer relief can be claimed will also rise, from £500,000 to £625,000 .
Here, four people from different parts of the country explain how the changes may affect them.
First time buyer
Ellie Stevens, a local government grant manager, held off on trading up on her first property purchase in the hope that a stamp duty cut would be announced and will now save £5,000.
Stevens and her partner, a graphic designer, both 29, have been renting in Bristol for seven years and have been trying to buy a house for a year.
“This cut is really good news for us personally. It’s a year’s savings for me. But I think it’s going to make it harder for people like us to buy a house in the long term. The real estate market here is already completely crazy. We made offers on 10 houses, always at 10% over asking price, and had only two accepted,” says Stevens. “For each property, there were at least 15 interested buyers.”
During the pandemic, house prices in Bristol rose in part, says Stevens, because of Rishi Sunak’s temporary stamp duty holiday.
“We had to offer £50,000 above the asking price to secure this place. I don’t think anyone in our chain will raise their prices as a result of these duty cuts, but if this offer had gone through we would have been priced out of Bristol and moved out of the city due to rising mortgage rates and prices.”
The growing family
For Chris, 36, an IT engineer at a trading firm, the stamp duty cut is “bittersweet”.
On the one hand, Kwasi Kwarteng’s announcement confirmed Chris’ decision to extend his two-bedroom house in Walthamstow, north-east London, which his two young boys have started to outgrow.
“My wife and I moved here with our sons six years ago, but it’s not big enough for us now,” he says. “We’ve discussed an extension but decided there’s no point when we can just move. So the idea was to look into it next year. We’ve had a valuation and it’s about as serious as we got. But the reduction in stamp duty is another reason to go ahead with it.”
Chris says he is not concerned about the potential for house price increases as a result of the cut. “No matter what [price changes] happens to a new house, will happen to our house. We are not first-time buyers, so I take the market hot or cold with a grain of salt.”
However, Chris has reservations about the government’s wider economic plan. “Though [the stamp duty cut] will benefit me, I also share the concerns that we as a country borrow a lot of money. But I guess I just have to get on with what we have to do as a family.”
The second home buyer
Rajinder Singh, 34, a mortgage broker from Coventry, bought his first home 14 years ago and is looking to buy a second, bigger property to move into with his wife and children. He has calculated he will save £2,500 and sees the reduction in stamp duty as “a positive”, although he had hoped for something similar to Rishi Sunak’s stamp duty holiday in July 2020.
“I will see a small reduction in my stamp duty but not as much as I might have hoped for based on what happened just after the first lockdown. Under the changes the former chancellor implemented I would have saved significantly more why I think these reductions are more aimed at first time buyers.
“I’m lucky in the sense that I don’t have to sell my property – it is let out via a rent-to-buy mortgage. I can buy the next one using some of the equity in the one I have.”
Singh does not believe house prices will rise after the stamp duty cut in the same way they did in 2020, despite recent warnings from analysts. “That reduction in stamp duty came into place at a time when we were just coming out of lockdown, when there was a lot of built-up frustration and people had been saving money. It was just the perfect cocktail for a massive rise in property prices. I don’t think it will have the same effect.”
Robert Hughes, a retired civil servant, has been trying to sell his Lincolnshire home for some time and hopes the stamp duty cuts will help breathe some life back into a sluggish housing market in his area.
“Our house has been on the market for a few weeks, we lost a buyer because the chain collapsed. We want to be closer to our children. Judging from sites like Rightmove, it’s clear that fewer properties are coming on the market in this area and that properties remain unsold for much longer Many sellers have cut prices here recently as higher interest rates and rising inflation dampen appetite for larger individual investments.
“I think that today’s stamp duty cuts are about right and will stimulate the housing market, while other pressures such as interest rates and inflation would put a pause on house prices rising – although in the longer term house prices may well rise due to this cut. It’s a bit of a crystal ball situation. It is also true that many people can now use the savings on home improvements, which stimulates the economy. All in all, I think it’s a good thing that will provide a much-needed short-term economic boost.”