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Over 30,000 more people to be hit with Stamp Duty

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09/01/2014
Tens of thousands more first-time buyers will be liable to pay Stamp Duty in 2014 as property values increase.

A report published today forecasts that, with first-time buyer house price inflation outstripping the general market, in 2014 31,000 more first-timers will be buying property over the £120,000 threshold at which Stamp Duty Land Tax kicks in.

This is placing greater demands on deposit savings and will mean thousands of new buyers will now need to budget for Stamp Duty in 2014. London first-time buyers are particularly hard hit, further penalised by the ratchet into the 3% Stamp Duty bracket.

The report, compiled by HowToHomeBuy.co.uk, has taken an average of five regional property price predictions and concludes that the average price of a first-time buyer home in the East and West Midlands will reach £126,368 & £131,297 this year, indicating over 31,000 additional first-time buyers will now need to pay Stamp Duty, at an average cost of £1,300.

It also calculates that in 2015 the average first-time buyer property in Yorkshire and the Humber will reach £126,305, breaching the 1% Stamp Duty threshold for the first time.

London first-time buyers suffer a triple whammy: very low levels of Help to Buy support (only 5% of Help to Buy equity loans were completed in London in 2013, according to government figures. Also, the average price of a property bought using the Help to Buy equity scheme is 42% lower than the London first-time buyer average.

Secondly, higher Stamp Duty as many are tipped into the 3% band adds over £5,500 to the London first time buyer’s expenses. And finally, mortgage affordability is worse in the capital then it was in 2007 (the average first-time buyer property price was 7.5 times earnings in the third quarter of 2013, compared to 7.2 times income in the third quarter of 2007).

Amie Gramlick, founder of HowToHomeBuy, said: “At a time when first-time buyers are flooding back into the property market, there are signs their return may not be a smooth journey. In 2014, we will see a far greater number of first time buyers needing to pay Stamp Duty and the biggest concern will be a continuation of the price inflation that was seen in the first-time buyer segment of the property market in the second half of 2013.

“Despite those potential issues, affordability in all regions outside London remains greatly improved versus 2007 peaks. Alongside increasing competition in the high loan to value mortgage segment and the ability for buyers to fix now at low interest rates, 2014 still looks to be promising for first-time buyers, although London buyers continue to experience the greatest challenges.”

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