A cut in stamp duty for first-time buyers, reportedly being considered for next month’s Budget, could help young people get on the property ladder and reverse falling revenues at London-only estate agent Foxtons.
According to the Evening Standard, the stamp duty cut is among a series of measures being considered by Chancellor Philip Hammond that aim to help young people and restore “intergenerational fairness” to the system.
Stamp duty is a huge deterrent for people trying to buy their first home.
The average price paid by new entrants to the London property market is £428,546, which means a tax bill of £11,427, Land Registry figures show.
Meanwhile, a starter flat costing £250,000 attracts a stamp duty bill of £2,500.
Ministers said even young professionals on good money in London feel they are missing out on things their parents took for granted, including buying a home.
In addition to a potential stamp duty cut, Number 10 is urging Transport for London and other public bodies to release unused land for homes to be built on.
“The Budget is a good opportunity to seize the political initiative domestically through bold measures on issues like housing,” said a Tory source.
“A stamp duty cut for first-time buyers would help all those in London whose starter homes are above the threshold of £125,000.”
The cut could also have a beneficial knock-on effect on companies like Foxtons, who are suffering from the slowdown in the housing market.
The estate agent’s revenue for the quarter ending 30 September was £35.1 million, down from £37.5 million in the same period last year.
Total revenue for the year so far also fell, from £106.3 million to £93.7 million.
Foxtons’ last set of full year results, announced in March, showed its annual profits fell by 54% year-on-year, driven by London’s stagnant housing market, Brexit uncertainty and the hike in stamp duty in April 2016.
But there are fears that without an increase in new homes, a stamp duty cut could backfire by driving up prices.
A stamp duty holiday was used by John Major to revive the market in 1992 and big cuts for young families were advocated by the Tories and picked up by Gordon Brown in 2005.
Treasury studies have cast doubt on the benefits of cuts unless supply is also boosted.
Tory former minister David Willetts told BBC Radio 4’s Today programme: “If you are 30 now you are probably earning less than someone who was aged 30 10 years ago. Anything that rebalances and helps young people, I’d be in favour of.”
But he said tight public finances meant taxes would have to rise on older people if the young received help: “Any help you give to one part of the population does have to be offset by increases on others.”
DealMakerz thinks a cut in stamp duty for first-time buyers would be the right decision and help to restore a measure of equality between the old and young.
Stamp duty has soared to eye-watering figures in recent years as house prices have spiralled.
It is a huge barrier for first-time buyers, particularly those in the capital, who already struggle to raise enough money for a deposit.
There’s a worry that house prices could rise even further if interest rates are increased in the coming months.
Anything that helps to unblock the system would be welcomed.