bbc.co.uk, hm-treasury.org.uk (image courtesy of moneyextra.com)
The first-time buyer stamp duty exemption will end in March 2012 , with the Government saying that the relief has been “ineffective.” In his Autumn Statement, Chancellor George Osborne said that the policy had failed to get people on the property ladder and that the concession would be scrapped on the date that was previously planned.
Although lenders’ groups have reacted with disappointment and the Council of Mortgage Lenders (CML) say that there could be a first-time buyer ‘rush’ at the beginning of the year, the Office for Budget Responsibility (OBR) has predicted that the Treasury’s income from this tax will remain stagnant, even without the concession.
To answer its critics, the Government says that it is prioritising “more effective measures” to help first-time buyers. This will include a mortgage guarantee scheme that encourages lenders to offer 95% mortgages to purchasers of new homes. The relief of 1% stamp duty on houses priced between £125,000 and £250,000 will end on 24th March 2012.
The director general of CML, Paul Smee, said: “While the concession may not have stimulated additional demand, it was a significant help to home-owners entering the market and its removal runs counter to the themes of the new housing strategy. It is likely that we will see a bunching of eligible first-time buyer transactions early next March to beat the expiry date on the concession.”
With first-time buyers being the lifeblood of the housing market, the Government will certainly have to attempt to replace the scheme with something effective. According to some estate agents, the number of newcomers to the market is now at a three year low.
Market Predicted to Pick Up in 2013
Accompanying the Chancellor’s Autumn Statement was a prediction that the housing market would kick into life in 2013 after a number of stagnant years. The forecast was made by the OBR, who stated that there would be a 20% rise in transactions in 2013-14, compared with the previous year. It also predicted that house prices would start to rise above inflation from the same year, reaching annual growth of 4.5% in 2015-16.
Sales have been at a comparatively low level during the period of economic turmoil; kept low by a combination of lenders unwilling to lend, buyers worrying about their finances and sellers unwilling to lower asking prices. Latest figures from HM Revenue & Customs show 76,000 homes were sold in October, which was 1,000 more than September, but 3,000 down on October 2010.