How Has the Stamp Duty Rise Affected First Time Buyers?

How Has the Stamp Duty Rise Affected First Time Buyers

How Has the Stamp Duty Rise Affected First Time Buyers?

From the outside, the changes to Stamp Duty may appear to be a win for first time buyers. Less to pay, with just a 1% charge on homes between £125,001-£250k, it felt like those looking to purchase their first home finally had a chance alongside the Help to Buy scheme’s offerings. However, a closer look at the property market since these changes have come into effect tell a different story.

Using a Stamp Duty calculator, we can work out that a property now costing £125,001 will incur a land tax charge of £0.02, whereas before dipping your toe over the bracket would have resulted in you paying £1,250. This is because Stamp Duty is now paid on the amount of money over the price bracket instead of the whole value of the property. On the surface, this is a positive change but let’s take a closer look.

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With the alleviation of Stamp Duty sellers are less likely to take their buyers into consideration

Properties no longer reduced in price

Those selling their homes before the changes were once reducing prices to entice buyers into making a purchase, as lower value properties just under the original percentage brackets for Stamp Duty saw more interest. However, now that the dramatic costs of Stamp Duty have been alleviated those selling property don’t have to take their buyers into consideration so much and are hiking prices up, which means those with smaller deposits are struggling again to find their place on the property ladder or to climb that first rung at all.

A new juggling act

The changes in Stamp Duty have not alleviated the issue at all as higher property prices mean higher Stamp Duty costs. A property just over the bracket may cost £0.02 but jump to a property worth say £214,000 – the UK national average, which actually rose by £17,000 in June 2016 – incurs a Stamp Duty cost of £1,780. It has now simply become a juggling act, weighing up whether to opt for a higher priced property and incur a higher Stamp Duty charge or go for a lower priced and less desirable property to save that money.

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Strict budgets are essential for first time buyers

The positives

However, there is a significant positive outcome that occurs as a result of the recent Stamp Duty rise that has taken place. For those purchasing second homes with the intent to buy-to-let, a 3% Stamp Duty is now in place for additional properties.

This means more buy-to-let landlords are avoiding buying up smaller homes for profit and freeing up the market for first time buyers. These changes came into place in April 2016, so we should start to see movement in the market soon.

For first time buyers it’s a good idea to set a strict budget and to avoid stretching this further and further. Additional costs should also be factored in, on top of Stamp Duty fees, which include expenses such as mortgage valuation fees, surveys and local searches.


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