Government's stamp duty cut for first time buyers 'has failed to increase house sales'

Katie Morley
Nearly nine in ten housing surveyors said they had seen no rise in interest from first time buyers following changes to stamp duty introduced two months ago -  Chris Radburn

The Government's duty cut for first-time home buyers is having no significant impact on property sales, the Royal Institute of Chartered Surveyors has said.

Nearly nine in ten housing surveyors said they had seen no rise in interest from first time buyers following changes to stamp duty introduced two months ago. 

Theresa May has claimed that more than 16,000 first-time buyers have already saved thousands of pounds as a result of the change.

Earlier this month she said that the changes had had an "immediate impact", adding that more than a million first-time buyers set to benefit over the next five years.

However when property firms were asked whether they thought the policy would significantly help increase first time buyer sales over the coming months, the majority (66 per cent) told RICS that it would not. 

stamp duty changes for first-time buyers

Just over one in ten (12 per cent) felt it would result in higher overall activity, rising to 28 per cent in London, where first time buyers stand to benefit most from the stamp duty cut. 

Under the policy which came in to effect on November 22 last year, first-time buyers spending £300,000 or less on a property purchase will be free of duty. First-time purchases worth between £300,000 and £500,000 no stamp duty will be paid on the first £300,000, meaning a reduced rate is paid.

The maximum amount first time buyers can save under the policy is £5,000, which is the duty arising on a £300,000 purchase, however substantial savings can still be made on less expensive homes.

A transaction worth £208,000, the average price paid by a first-time buyer, would previously have been liable for a stamp duty payment of £1,660 – but a first-time buyer will now pay nothing.

Simon Rubinsohn, RICS chief economist, said: “The initial feedback from the market doesn’t suggest that the change in the stamp duty regime announced in the budget is going to have a material impact on activity. 

Stamp Duty Calculator

"Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first-time buyer."

At the time the Treasury auditor warned that the scrapping of stamp duty for first-time buyers would drive up house prices and leave them paying more for their homes than the saving made. The Office for Budget Responsibility said existing homeowners would be the biggest winners from the policy through inflated house prices. 

In November a RICS spokesman said: “Whilst the Chancellor is right to say there is ‘no single magic bullet’ to increase housing supply, it requires a lot more than the proposals he has put forward, which amount to a series of marginal and delayed ‘nudges’ at a time when housing supply needs an almighty immediate shove.

“Breaking it down, scrapping Stamp Duty for first-time buyers may stimulate activity at a time when the market is subdued, but this does not tackle the underlying problem and is something of a distraction from the need to increase supply."

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