Have Stamp Duty cuts really made a difference to the number of first time buyers? Apparently not.
01 August 2018
By Rosie Rogers
The government claims that 121,500 people became first time buyers, taking advantage of the Stamp Duty exemption introduced in November 2017.
It is suggested that from the date of introduction on 22nd November 2017 up until June 30th
2018, these new buyers have saved a total of £284 million, which works out at an average saving of just over £2300 per buyer.
Whilst the government is eager to suggest the Stamp Duty exemption will help a further million people onto the property ladder in the next five years, it is missing a clear question:
Are these first time buyers people who would have been buying anyway?
From our data we can see that of our users, 55% are first time buyers, and that number has been consistent from the 6 months before November 2017 right up to June 2018. There has been no large spike in first time buyer purchases, and in fact, when comparing the number of transactions from the Land Registry data, we can see a 13% drop for Jan-May 2018 compared to the same period in 2017.
Many critics of the exemption were concerned that it simply gave a slight discount to people who would have been buying their first home anyway, and probably would have paid the Stamp Duty Tax when the time came. If there has been no sharp uptake in first time buyers purchasing homes, it is likely that the numbers stated by the government were already on their way to buying.
With the average first time buyer needing to save over £30,000 for a deposit, saving a couple of thousand pounds in Stamp Duty (especially as first time buyer homes would usually fall into lower duty brackets) is unlikely to enable a step onto the ladder.
Whilst we commend the government’s attempts to support first time buyers and to understand the difficulty they face in getting on the property ladder, they may be overstating the effect of the Stamp Duty exemption. First time buyers need longer term, sustainable solutions, along with support during the process.
If these 121,500 first time buyers were already planning to buy, it is possible the government has missed out on £284 million worth of revenue that may have been better spent to support new potential home owners.
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Greg on 28/01/2021