Government dismisses stamp duty scepticism

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"The real issue that needs to be tackled is increasing the supply of properties, and while the Chancellor has committed himself to addressing "land banking" by developers, without sufficient supply, this stamp duty announcement could cause a bottle neck at the £500,000 threshold".

Britain's official budget watchdog, the Office for Budget Responsibility, said the stamp duty cut could in fact push house prices up, meaning the total cost of buying a home would rise for first-time purchasers even with the tax reduction.

The abolition of the tax for first-time buyers featured in yesterday's budget statement, applying to those buying a property at £300,000 or less.

That is because 2% duty now applies on every pound above £125,000 that a home costs, up to £250,000, while a 5% band now applies on the band between £250,000 and £925,000.

The chancellor told BBC News that the average saving for first-time buyers would be £1,700 - that is the amount of stamp duty that would previously have been payable on the average property bought by first-time buyers, according to the Halifax.

This point about rising prices was put to the chancellor on the Today programme, but he said this was looking at the stamp duty change in isolation without the effect on the market of the 300,000 net homes per year that the government plans to build in England by the middle of the next decade.

The OBR also quoted HMRC's verdict on the similar stamp duty holiday after the financial crisis, which was that it "has not had a significant impact in terms of improving the affordability of residential property for first-time buyers".

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So if you have sold up and rented for a while, you do not qualify.

In a joint purchase, all purchasers would need to be first-time buyers to qualify for any benefits.

First-time buyers will pay 5% on any part of their purchase between £300,000 and £500,000 - this means anyone spending £500,000 on a home will pay £10,000 in duty, £5,000 less than under the previous rules.

The Government said it was introducing the changes because those trying to get onto the housing ladder were more cash constrained than other buyers, as they also struggled to cobble together deposit and conveyancing fees.

There has been no major announcement in the Autumn Budget this year except stamp-duty cut for first time buyers.

"Thus the main gainers from the policy are people who already own property, not the FTBs themselves", the OBR said.

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