With the Chancellor making changes to school funding, road tax and personal tax allowance among others, many expected to see a rise in the stamp duty threshold from £120,000 to £150,000. The industry reacted with disappointment that the level was only raised by £5,000.
Stephen Leonard, director of mortgages at Alliance & Leicester (A&L), expressed his unhappiness with the government’s decision. He said: “This is not enough. A stamp duty threshold of £125,000 is still 9 per cent below the average house price for the first-time buyer (FTB). While this is a step in the right direction and recognises the plight of FTBs who are the life-blood of the market, it represents only a 4 per cent increase. A&L will continue to press for FTBs to be made exempt from paying stamp duty.”
Nicholas Leeming, director of propertyfinder.com, added his disappointment. He said: “The latest data from the Office of the Deputy Prime Minister (ODPM) shows the average price of properties bought by FTBs is £135,742, so raising the threshold for stamp duty by just a smidgeon to £125,000 will do little to help the majority who are struggling to get a foot on the housing ladder. If the Chancellor is serious about improving the affordability of property for the less well off, there will need to be more significant changes.”
However, Leeming admitted the raising of the inheritance tax threshold will impact on the housing market. “It is appropriate that rising property prices should be recognised by the inheritance tax system, and by raising the threshold to £325,000, the Chancellor has signalled his recognition of the strength of public feeling on this issue,” he said.
Peter Williams, deputy director-general at the Council of Mortgage Lenders (CML), welcomed moves to increase the first-step stamp duty thresholds, and plans to increase shared equity opportunities. He said: “Although the Budget gave us few dramatic new announcements, we welcome the Chancellor's continued commitment to delivering shared equity schemes and increased home-ownership. Although the stamp duty starting threshold has helpfully been raised, the number of buyers who would have escaped stamp duty last year as a result of the updating is outweighed by those who became liable for stamp duty as a result of rising house prices.”
However, Jeff Knight director for marketing at GMAC-RFC, suggested stamp duty has little affect on FTBs. He said: “We clearly welcome any measure that makes it more affordable for potential homeowners to clamber on to the property ladder. However GMAC-RFC’s research shows that even a substantial rise in the level at which stamp duty has to be paid is extremely unlikely to bring FTB lending back up to the 50 per cent levels of previous years because of the fundamental shift in attitudes. We can only find solutions to the historically low numbers of FTBs if we understand the reasons behind this shift.”
As part of the Budget, Gordon Brown made several other announcements likely to impact on the housing market. Commenting on the subject of home ownership and shared equity Adrian Coles, director-general at the Building Societies Association (BSA) said government changes represent a further step forward for the housing market. “The building society sector has already stepped up to the challenge of helping more people onto the housing ladder through shared equity and responding to local housing needs. Two of the three current government partners for the shared equity schemes are societies. It’s important the government works with building societies to ensure take-up isn’t hampered by excessive bureaucracy.
“What we must ensure is that homeownership is sustainable – that people can continue to pay their mortgage in good times and bad, even if rates go up or they have a change in their circumstances. It is also important that shared equity scheme property owners can also continue make their rental payments.”
Coles added the move to increase the amount of affordable housing would help the housing market. “Building more houses means more people have a chance to realise their dream of buying a place of their own. The continued commitment of the government in delivering better, more efficient planning will help in tackling the lack of supply, which is partly responsible for driving up prices.”
