However it could also pump up demand for homes, causing the gap between supply and demand to widen further.
The government’s move to permanently abolish stamp duty for first-time buyers on property purchases up to £300,000 has received a mixed reaction from the industry.
The consensus is the move, which comes into force with immediate effect across the UK except from in Scotland, will inject more momentum into the housing market and remove a barrier to homeownership.
However it could also pump up demand for homes, causing the gap between supply and demand to widen further; a key contributor to house prices spiralling out of reach of potential first-time buyers in recent years.
Positive reception
Those who seemed pleased with the change includedJeremy Duncombe, director, Legal & General Mortgage Club; Jeremy Leaf, north London estate agent and a former RICS chairman; Jeff Knight, director of Marketing at Foundation Home Loans; and Craig McKinlay, sales and marketing director at The Northview Group.
Duncombe said: “This is a promising move from the government which will no doubt be welcomed by thousands of younger buyers across the country who are struggling to get their foot on the housing ladder.
“For too long stamp duty has stood as just another barrier to homeownership, another cost to overcome, but with this exemption the path to owning a home has been made just that bit easier.”
He was echoed by Leaf, who said: “The reduction in stamp duty at the lower level is hopefully just the tonic the market needs to improve transactions for first-time buyers in particular, in both lower and higher-priced areas.
“This should have a knock-on effect for transactions right through the market and the overall economy.
“The fact it is a permanent move adds welcome certainty to those buying now and those thinking of buying in the future.”
McKinlay said: “An exemption of stamp duty for first buyers is certainly a positive move from the government to help free up bottlenecks in the housing market.
“This land tax has been a major stumbling block for younger buyers amidst rising property prices.”
And Knight said: “it will certainly inject some more momentum into the purchase market and give those starting out a leg-up in the face of increasing house prices.”
Critics of the announcement
However Lea Karasavvas, managing director of Prolific Mortgage Finance, was among those critical of the announcement.
He said: “Primary school children have taken a stamp duty bullet so millennials can get on the housing ladder.
“The whole point of the housing crisis is that demand is too high relative to supply.
“Fiddling with the economic stop cock by effectively handing out free money only exacerbates the problem and won’t help buyers, brokers, lenders or sellers in the long run.
“Businesses and markets function best when they’re not caught in a boom-and-bust cycle and that’s what we’re all stuck with."
He was echoed by Nick Sanderson, chief executive of Audley Group, who said: “The focus on the bottom end of the market alone is a blinkered focus and continues to ignore where much of the greatest potential in the market sits: the over 65s.
“Commitment to house building is welcome but not every first-time buyer wants to move into a new build and stamp duty exemptions to help older buyers downsize would be far more cost neutral in the long-term.
“Two in five UK homes are under-occupied, of which half are occupied by those aged 50 to 69, in the main due to lack of quality accommodation for them to move into.
“It’s time to address the facts: if we truly want to kick-start movement in the market, we need to stop continually plastering over the cracks and invest in quality housing options for the older generation.”
Dan Wilson Craw, director of Generation Rent, felt sellers will benefit from the change more than buyers.
He said: “In areas where first-time buyers are competing with investors for homes, no stamp duty to pay will give them more purchasing power.
“But where they’re competing with each other it just means they have more cash with which to make an offer. The real winners are people with property to sell.
“Meanwhile, for the millions of private renters for whom home ownership is a distant prospect, the Chancellor has announced a consultation on removing barriers to longer tenancies.
“But we have no sense of how ambitious the government is willing to be on this, so real improvements in renting still feel a long way off.”
Dan Wilson Craw, director of Generation Rent, felt sellers will benefit from the change more than buyers.
He said: “In areas where first-time buyers are competing with investors for homes, no stamp duty to pay will give them more purchasing power.
“But where they’re competing with each other it just means they have more cash with which to make an offer. The real winners are people with property to sell.
“Meanwhile, for the millions of private renters for whom home ownership is a distant prospect, the Chancellor has announced a consultation on removing barriers to longer tenancies.
“But we have no sense of how ambitious the government is willing to be on this, so real improvements in renting still feel a long way off.”
AndMatt Robinson, chief executive of Nested, felt more still could be done for first-time buyers in London.
He said: “The vast majority of London buyers will remain heavily penalised, where a modest family home can easily go for over one million pounds.
"Far more still needs to be done to aid affordability and loosen up the market.”
