One of the few supposedly noteworthy aspects of Philip Hammond’s Budget today was the abolition of stamp duty for first-time buyers on house purchases below £300,000. Sounds nice, but in fact it benefits almost nobody – except those who already own a high-priced home.
Office of Budget Responsibility (OBR) Chair Robert Chote explained that the abolition would in fact increase house prices by more than the stamp duty saving, so those selling a home would gain but not those buying:
The OBR’s formal report also said that the number of home-buyers who would be enabled to buy a home by this measure is a tiny 3,500 – and the change does nothing whatever to address the far larger issue of the scale of deposit first-time buyers need to save: an average of almost £33,000 across the country, according to the Halifax.
The maximum threshold to receive any benefit from the change is a house price of £500,000 – a penny higher and all discounts are lost. But to be able to afford to benefit at the top end of the range – which would apply to almost everyone buying in London or other expensive parts of the country, buyers would need an income of over £140,000 a year just to qualify for a mortgage.
And far higher for those who also have student debts to repay.
And that’s the key flaw with the Tories’ token gesture – it’s a demand-side change that does nothing to address the overheated housing market that has forced house prices to unaffordable levels in many parts of the country.
For the very richest, or those with rich parents, the new measure amounts to yet another tax-cut for the wealthy. But to change the real problem – shortage of supply – will require far bolder and more decisive issues than a weak Tory government and a managerial Tory Chancellor are capable of.
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