More work could land on conveyancing solicitors' desks after the government today announced it is abolishing stamp duty land tax for first-time buyers purchasing homes up to £300,000. First-time buyers wanting to purchase a property up to £500,000 will not pay stamp duty on the first £300,000 and 5% from £300,000-£500,000.
The Treasury estimates that today's announcement, which was widely expected, will help over one million first-time buyers get onto the housing ladder over the next five years.
Chancellor Philip Hammond, told MPs this lunchtime he had received representations for a stamp duty 'holiday' for first-time buyers. However, 'this would only help those ready to purchase now. It would offer nothing for the many who will need to save for many years', he said.
An HM Treasury briefing document published after Hammond's speech states that first-time buyers 'are more cash-constrained than other buyers' and that stamp duty 'can represent an upfront cash burden on top of a deposit and conveyancing fees'.
The Treasury says today's changes means that the stamp duty bill for the average first-time buyer in London will nearly halve, from £10,500 to £5,500. Nearly all first-time buyers who pay stamp duty will benefit, including almost 80% in London.
Outlining what the changes means in practice, the Treasury says solicitors will have to enter a code on the stamp duty return indicating that the client is a first-time buyer and calculate the stamp duty due according to the new rates.
A first-time buyer is defined as someone who has never owned a freehold or leasehold interest in a dwelling before and who is purchasing their only or main residence. Residential property anywhere in the world is counted when determining whether someone is a first-time buyer. All purchasers in a joint purchase must be first-time buyers to be eligible for the relief.
First-time buyers in Wales will benefit from today's changes until April next year, when the matter is devolved to the Welsh Government, which is introducing a land transaction tax.
Hammond said: 'When we say we will revive the homeowning dream in Britain, we mean it. We do not underestimate the scale of the challenge but today we have made a substantial down-payment.'
In a blow to the chancellor however, the independent Office for Budget Responsibility said this afternoon that the main effect of the stamp duty cuts will be to raise house prices, by 0.3%. 'Thus the main gainers from the policy are people who already own property,' the OBR added. It added that only 3,500 FTBs will benefit and that the measure could be abused by non-FTBs.
But Jackie Roe, head of residential conveyancing at national law firm VWV, said: ‘This measure will help reduce the upfront cost of home ownership for first-time buyers, and ease the pressure of saving for a deposit, by removing the extra demand of paying SDLT. For many first-time buyers, this will be a welcome windfall, especially for those have already set aside money to pay SDLT at the standard rates.’
Other experts commented on the need for wider action to tackle the housing crisis. Robert Lee, head of real estate at international firm DAC Beachcroft, said: ‘While it is encouraging to hear the chancellor focus his fire on housing, it will be important that he achieves the right balance in the longer term. Crucially, in order to maximise the delivery of both open market and affordable housing, the government should concentrate on the funding of major infrastructure to facilitate serviced sites rather than do so through the planning system. This would free up the housebuilding industry to perform its primary function – namely, to deliver housing - and leave the government to fund and to provide the infrastructure that makes the speedy delivery of housing both viable and physically possible.
‘We would also have liked to see much more emphasis today on finding effective ways of cutting through the excessive red tape surrounding pre-commencement planning conditions, which in turn would allow the speedier conversion of permitted schemes to housing delivery. It is to be hoped that the newly-minted working party set up to consider the delivery aspect of consented sites will address this vital issue fully over the coming months.’