first time buyers

Saying farewell to stamp duty — will it make a difference in Scotland?

 

There’s been much excitement for first-time property buyers in England and Wales since Chancellor Philip Hammond abolished stamp duty on house prices up to £300,000. With the average house price in England currently sitting at about £244,000, that’s pretty great news.

 

But since Scotland’s budget is set by the Scottish Government, and they replaced stamp duty with Land and Buildings Transaction Tax (LBTT) in April 2015, will there be any effect on Scottish property seekers?

 

Right now, LBTT kicks in at £145,000 — which is about the same as the average Scottish property price. So it seems, on the surface at least, like Scottish buyers are getting something of a raw deal.

 

Scotland v England

 

First-time buyers on both sides of the border are actually doing fairly well — tax-wise, at least. In England and Wales, the average cost of a first home is around £178,000. In Scotland, it’s £139,000. Both are well below the stamp duty or LBTT thresholds.

 

Buyers moving up, down or across in England, however, are less well off. The stamp tax abolition doesn’t apply to them — former owner-occupiers or buy-to-letters still have to pay full stamp duty, which kicks in at £125,000. Based on the average house price, then, most movers will be looking at stamp duty of about £2,300.

 

In Scotland, housebuyers pay 2% of the taxable value on purchases from £145,000 to £250,000. Since the average price is about the same as the first threshold, that means most housebuyers, not just first-timers, don’t pay LBTT.

 

Government intervention?

 

You could argue, then, that Scottish housebuyers are better off with or without government intervention, although the Chancellor’s announcement has certainly increased pressure on the Scottish government to offer more help to first-time buyers.

 

In fact, major Scottish housebuilder MacTaggart and Mickel has already stepped forward to say it will pay LBTT on all first-time buy purchases of new homes up to £300,000 until April next year, adding a little to the pressure on the Scottish Government. It, however, is not to be drawn into any detail on its plans, which will be revealed in mid-December.

 

Main effect of abolition or reduction

 

Will the abolition or reduction of stamp duty or LBTT really benefit buyers? The Office for Budget Responsibility (OBR) has expressed concerns that the main effect will be to push up prices, saying the main beneficiaries in that case would be sellers.

 

Savings from Stamp Duty or LBTT, on the other hand, might help buyers afford higher-price homes by allowing them to add to their deposits.

 

Deposits, in fact, are the main issue facing all buyers, particularly those looking for their first-time property. In Scotland, the average deposit is around £26,000. In England and Wales, it’s almost double that, at around £45,000 — although any average calculation is skewed by figures for London, the east, south-east and south west of England, where prices are significantly higher.

 

There are, of course, mortgages out there that require minimum deposits, however they increase the overall debt owed and the likely monthly repayment. So for any housebuyer, first-time or otherwise, the property market remains something of a balancing act.

 

They need to consider their deposit. If they don’t already have one, where’s it coming from? They need to think about monthly repayments — especially if they’re borrowing to cover the deposit, too. They need to factor in stamp duty or LBTT, whatever the governments of England and Scotland decide to do, if the property they want crosses the price threshold. And they need to add all that to the costs of moving, mortgage advice, marketing and legal fees.

 

In my view

 

My personal view is that the stamp duty abolition was a great headline-grabber, but that it won’t necessarily make a huge amount of difference to housebuyers in England. It may push prices up slightly, but they’re probably going to rise anyway – that’s certainly been the trend recently.

 

In Scotland, the average purchase price is below the LBTT threshold. There might be an argument for increasing that threshold, but is that likely to benefit first-time buyers? Unlikely – they’re not usually looking for properties in the higher price ranges.

 

I believe there are bigger problems to be addressed, with the major one being helping those who are struggling to achieve a reasonable deposit. We should be thinking about how to support them, because by doing so we’re supporting the whole market. Stamp duty and LBTT are only a small part of the overall housebuying process. We need to focus on the whole if we’re to maintain a healthy, growing and accessible property market well into the future.

In my view

 

My personal view is that the stamp duty abolition was a great headline-grabber, but that it won’t necessarily make a huge amount of difference to housebuyers in England. It may push prices up slightly, but they’re probably going to rise anyway – that’s certainly been the trend recently.

 

In Scotland, the average purchase price is below the LBTT threshold. There might be an argument for increasing that threshold, but is that likely to benefit first-time buyers? Unlikely – they’re not usually looking for properties in the higher price ranges.

 

I believe there are bigger problems to be addressed, with the major one being helping those who are struggling to achieve a reasonable deposit. We should be thinking about how to support them, because by doing so we’re supporting the whole market. Stamp duty and LBTT are only a small part of the overall housebuying process. We need to focus on the whole if we’re to maintain a healthy, growing and accessible property market well into the future.

No Comments
Post a Comment