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'Worrying!' 5 experts predict what will happen to house prices after stamp duty cut

Daily Express logo Daily Express 24/09/2022 Phoebe Cornish
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land tax rates have been cut with immediate effect by Chancellor , saving the average buyer in England thousands of pounds on a home purchase. While the decision to permanently raise the nil-rate STLD band has been applauded by many experts for giving the market a "huge boost", others have branded it "irresponsible" in fears it will worsen the already unfair system.

A spokesperson for the National Association of Property Buyers highlighted the "lack of detail" from the Government on how the housing supply would be increased to meet the soaring demand - a move which could make the potential savings redundant for those who need them most.

The move announced by the Chancellor on Friday is expected to see house prices soaring after Mr Zahawai doubled the property purchase value at which buyers have to pay stamp duty land tax (SDLT).

Anyone in England and Northern Ireland who isn't a first-time buyer is now exempt from paying SDLT on homes that cost £250,000 or less while first-time buyers are exempt from the tax when purchasing a property up to the value of £425,000.

But will a rise in prices might sound like good news for sellers, actually this could be an issue for those looking to get on the market as well as downsize or upsize their homes. We spoke to the experts to find out what this really means for prices.

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Estate Agents/ The Chancellor © GETTY Estate Agents/ The Chancellor

Properties in the UK are now more unaffordable than ever, with figures released by the ONS showing that the average home sold in England cost the equivalent of 8.7 times the average annual disposable income.

The severe under-supply of houses has pushed average prices to a record £294,260 according to recent statistics from Halifax, despite economic uncertainty tightening buyer budgets.

Jonathan Rolande of the National Association of Property Buyers noted that with the low supply and newfound "frenzy" sparked by the Government, there is an increased risk that house prices will spike again as demand soars.

He said: "This budget with giveaways to put more money in people's pockets and cutting the cost of buying a property means the market is set to hold steady, perhaps even continue its seemingly never-ending upward climb.

"But my fear is that without an increase in the supply of property the unfairness in the market is set to be even more 'baked in'. Those hoping to take their first step onto the ladder soon, may well just have seen it pulled up ever further out of reach."

The buyers most likely to benefit from the cut will be those in London and expensive areas of south East England, the figures show. For instance, the average property price in the North East of England according to Savills is £132,798 - meaning buyers weren't affected by the SDLT before the cut was announced.

In London however, average prices have reached £456,307 - which would mean a £7,815 saving for a first-time buyer - something they can then use to put more towards their deposits.

But as prices are expected to rise, buyers need to watch out they don't pay over the odds for a home and therefore lose out on any potential savings from the cut.

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UK map of house prices 2024 forecast © THE EXPRESS UK map of house prices 2024 forecast

As the threshold for stamp duty has risen from £125,000 to £250,000, house buyers will no longer need to pay an additional charge on properties above this amount.

So where can you buy for under £250,000?

Andrew Montlake, managing director of mortgage brokers Coreco said: "The stamp duty change announced is mercifully effective today and a permanent change, rather than an unwanted holiday period that causes more issues than it solves.

"This will indeed help many first-time buyers who have agreed prices now, but we need to be careful that, as usually happens, house prices don't simply rise further to eat up any potential savings and push homes out of reach for many more, especially at a time of higher interest rates."

Tom Bill, head of UK residential research at Knight Frank, warned that the SDLT cut will increase demand in the housing market but that any benefit to sellers or buyers will be instantly countered by the recent Bank of England base rate change.

He said: "Many buyers will find the impact of rising mortgage rates soon eclipses the benefit of a stamp duty cut, which will keep firm downwards pressure on prices next year.

"The cost of a five-year fixed-rate mortgage has almost tripled over the last year and this upwards trajectory will continue.

"Almost four million first-time buyer mortgages have been issued since 2009, which is a large group of homeowners who don't know what it's like when monthly interest payments rise meaningfully. The gravitational forces of higher rates will bring house prices back down to earth irrespective of any stamp duty cut."

The decision to increase the nil-rate stamp duty band from £125,000 to £250,000 means an extra 200,000 buyers in England and Northern Ireland will pay no stamp duty whatsoever.

While the Chancellor's announcement will provide financial relief to everyone moving up or down the property ladder to a certain degree, Adrian Anderson, Director of property finance specialists, Anderson Harris noted that it will be "especially good" for people living in London and the South East, who can claim a discount on purchases up to £625,000.

Assuming that the existing stamp duty bands remain unchanged, the permanent cut means that the stamp duty bill on an average £312,000 home in England will fall from £5,600 to £3,100 - a drop of 80 percent.

Though the tax cut was announced with first-time buyers in mind, industry experts have highlighted that it is more accommodating to those in the higher price range.

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House for sale signs © GETTY House for sale signs

Jamie Lennox, director at Norwich-based mortgage broker, Dimora Mortgages said: "For first-time buyers, the increase to the limit is likely only going to help the already wealthy and won't benefit the masses.

"Ultimately, given it's not a huge saving and only benefits a small number of first-time buyers, I don't see this as a repeat of last time when the housing market went supersonic.

"The lack of supply of houses available for sale still remains a real issue and a £2,500 saving for someone to move doesn't seem like a huge incentive given how much more expensive mortgages have become."

Andrew Mortlake, managing director of mortgage broker Coreco added that one of the main concerns with the new policy is that it will cause the very thing the Bank of England is keen to avoid: higher inflation.

He noted that the result is that the BoE will need to increase interest rates even further - a move that could be "catastrophic" for the country.

The NAPB's Mr Rolande warned that while they support the permanency of the Government's proposals, they lack clarity in terms of the supply issues currently faced by homeowners in the UK.

He said: "The new threshold of £250,000 truly reflects price rises and property inflation we see at present in the market. But, on the downside, there was a lack of detail on how the housing supply will be increased. That is worrying.

"The Government's Growth Plan promised to release more Government land to support housebuilding and to remove planning restrictions to boost supply. We now need to see the detail of that because it needs to go really far and wide to solve the supply crisis we have in the sector.

"Supply simply isn't there which means this cut could spectrally backfire by failing to help the people it's designed to."

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