Experts warn the changes could unsettle the market
Over a quarter, or 26%, of prospective buyers are unable to afford homes due to stamp duty costs while 15% of landlords are selling their portfolios in response to rising tax burdens, new research from property tax experts Cornerstone Tax has revealed.
The findings come as the government prepares to reduce stamp duty thresholds, which experts warn will exacerbate challenges for first-time buyers and rental market stability.
From April 2025, the stamp duty exemption threshold for first-time buyers will drop from £425,000 to £300,000. This change, announced in October, is expected to push many buyers into higher tax brackets. The rollback has already triggered a wave of market activity, with estate agents reporting a 25% rise in buyer registrations and a 30% increase in agreed offers year-on-year.
However, analysts caution that the rush to beat the deadline could intensify bidding wars, worsen housing shortages, and drive up prices further.
The financial strain could prompt more buyers to seek alternative funding, with 14% already resorting to short-term loans or emergency credit to cover stamp duty bills.
For landlords, rising costs are accelerating decisions to exit the market. Fifteen percent of landlords are selling properties due to higher taxes, including a surcharge on second homes and buy-to-let investments that will increase to 5% in 2025. This trend could worsen the rental housing shortage, which is already under pressure from surging tenant demand.
First-time buyers, in particular, are expected to feel the squeeze. Under current rules, some buyers pay as little as £50 in stamp duty, but the 2025 changes could increase their liability to over £2,500. Around 20% of first-time buyers will face stamp duty costs for the first time, with additional expenses for some exceeding £11,000.
The government expects the revised stamp duty rules to generate an additional £18.1 billion in tax revenue by 2030 and free up 130,000 properties for first-time buyers by reducing demand from landlords and investors. However, property experts warn that these changes could destabilise the market.
According to data from Hamptons, 90% of movers will face stamp duty bills under the new system, up from 50% under current thresholds. Analysts say this could deter activity in the market’s middle and lower tiers, where affordability is already stretched.
“SDLT payment bands have long been overdue for an overhaul as they have never been index-linked to house price inflation,” said David Hannah (pictured), group chairman of Cornerstone Tax. “An increase in these thresholds would stimulate activity at the lower end of the property market and allow first-time buyers to reduce the amount they need to borrow, thus improving their affordability calculations.”
Hannah also suggested exemptions for pensioners to encourage downsizing, which could free up homes for younger buyers.
“As we all know, a rising tide lifts all boats – those looking to purchase properties on the mid-to-high end of the property market will now have a chance to sell their low-end properties as a result of the increase in demand from prospective buyers, contributing to further momentum within the housing market,” he added.
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