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Budget 2017 – Property Update

Budget 2017: Stamp duty abolished for first time buyers

Stamp duty land tax is to be abolished for first-time buyers purchasing a UK home worth up to £300,000, in a reform that official forecasts said would also trigger a rise in house prices.

First time buyers in more expensive areas will benefit from the measure: someone buying a property worth up to £500,000 will be exempt from the duty for the first £300,000 of its value, paying an effective rate of 5 per cent on the rest.

The Treasury said on Wednesday the measure would benefit 95 per cent of first time buyers who currently pay stamp duty — and will leave 80 per cent of those making their maiden home purchase paying no stamp duty at all.

Aimed at the millennial buyers who have struggled to get a foot on the housing ladder in areas of high property prices, the tax break is expected to cost the government £560m in lost receipts in 2018-19, its first full year of operation, according to forecasts in Treasury documents.

In its own five-year forecast, the Office for Budget Responsibility said the cut “would boost the level of house prices by around 0.3 per cent”. “The effect of this reduction in future [stamp duty] costs would be expected to feed through into house prices . . . relatively quickly,” said the UK fiscal watchdog. “Since the relief frees up first time buyers’ savings to put towards higher deposits, these higher prices can be paid.”

The OBR’s calculations on the impact of the reform found it would boost the number of first-time buyer purchases by about 3,500 but these “will displace other purchases by those who would have bought and paid the main rate of [stamp duty] and, in some cases, the additional properties surcharge [a 3 percentage point surcharge on buy to let and second homes]”.

More houses

Mr Hammond promised to use a £44bn package of investment, loans and guarantees to increase the annual amount of new homes to 300,000 in the middle of the next decade, from 217,000 last year, aided by planning reforms designed to encourage homebuilders not to sit on permissions already granted.

Council taxes to double on empty properties

Local authorities in Britain will be able to double council taxes on empty properties, in a move announced by UK chancellor Philip Hammond on Wednesday that will hit people with second homes. “It can’t be right to leave property empty when so many are desperate for a place to live,” Mr Hammond said as he presented his Budget. Councils can currently charge up to 50 per cent extra council tax if a home has been empty for two years or more, unless it is an annex to a property or the owner is a member of the armed forces. Under the chancellor’s plans, councils will be able to increase the council tax premium to 100 per cent.

Source: FT