Blog - 23/09/2022
First time buyers benefit most from SDLT reform
The Chancellor has just announced a cut in SDLT with the residential nil-rate threshold being increased from £125,000 to £250,000.
There is further help for first time buyers. The nil-rate threshold for First Time Buyers’ Relief is increased from £300,000 to £425,000. In addition the maximum amount that an individual can pay for a home whilst remaining eligible for First Time Buyer’s Relief is increased from £500,000 to £625,000.
This means that all individuals purchasing residential property from today onwards will pay less or no SDLT. There is an automatic saving of £2,500. This is the case even if contracts were exchanged before today.
The 3% rate for additional dwellings remains as does the 2% rate for non-UK resident purchasers.
The announcement states that the reduction is part of the Government’s commitment to support homeownership and promote mobility in the housing market which in turns supports economic growth. There is no mention of whether this is a “holiday” or a long term reform.
Whilst the reduction will be welcomed in the current climate of “every little helps”, it is not really much of a help for home movers. All homebuyers are faced with record interest rates – other than those who are able to port an existing mortgage deal – and a squeeze on living costs so it will only be the first time buyer for homes under £625,000 who will really benefit.
And therefore it will be the sub-£625,000 part of the market that will see the effects of the reduction. This will inevitably put up prices but maybe by not much. But the feeding frenzy that followed the SDLT holiday than ran from June 2020 to June 2021 might not reoccur if the reduction is a long term one. That will put less pressure on prices and therefore the benefits will not be as quickly eradicated as they were in the 20/21 holiday. Today’s buyers are faced with much higher monthly outgoings and a short term gain from a reduction in SDLT will soon be outstripped by those.
But estate agents still report a shortage of stock and the risks of house prices spiralling higher is always present whilst supply is low. Given the ongoing cost of living crisis we may see more homes coming on the market as people seek to downsize and move to more energy efficient and easier to maintain homes and which will also enable them to reduce their mortgage payments now that low interest deals have come to an end.
If you have any questions regarding this subject please contact Rosie McCormick Paice or any member of the Property team.
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