Has stamp duty been axed? This is what we know so far about Rishi Sunak’s plans to boost the housing market
The news hasn’t been great for the housing market of late. Last week, Nationwide revealed that house prices are starting to drop for the first time in eight years, down 1.4 per cent month on month. For the average home, that means a drop from £218,902 in May to £216,403 in June.
That means buyers, sellers and estate agents will be all ears when Chancellor Rishi Sunak delivers his Summer Statement on Wednesday to see what provisions – if any – will be made to revive house prices.
Has stamp duty been axed?
According to rumours circulating this morning, and as reported by The Sun, Mr Sunak is expected to introduce a six-month stamp duty holiday for homes worth £300,000 to £500,000.
At the moment, stamp duty is not charged on the first £125,000 of a property’s selling price. A rate of 2 per cent is then applied to between £125,000 and £250,000 of a home’s value, and 5 per cent on the next £675,000 of a property’s worth (up to a value of £925,000).
So for anyone buying a property for £500,000, that would result in a stamp duty saving of £15,000 – far from small change. And for those spending £300,000, the saving would equate to £5,000.
The tax break is designed to stimulate the housing market and encourage first-time buyers to make their first leap onto the ladder.
How much is the average deposit for your first house?
Mortgage comparison experts Bankrate.com/uk have looked into the numbers, and says the average deposit in the UK is around £33,000. Add stamp duty to that number, plus fees, and you would need savings well in excess of £40,000 to buy your first home.
Is now a good time to get on the property ladder?
Florence Codjoe, personal finance expert at Bankrate, offers her take on the current climate. ‘Before coronavirus, 2020 showed great promise for the UK’s housing market,’ she says. ‘But with lockdown severing demand and halting transactions, property specialists at Knight Frank believe the number of sales in 2020 will drop by a staggering 38 per cent, and Savills similarly predict short term house prices will decrease by 5-10 per cent.
‘It’s concerning, yes, but there are things to look forward to. Low house prices work for first-time buyers, and these lower asking prices mean the potential of jumping earlier onto the property ladder.’
‘This pandemic has shifted our views on what we want in a property, including where we want to live. As a result, more may settle for rural areas and open spaces in the city. If they can.’
‘For those first-time buyers, continue adding to your hard-earned savings and bear in mind a potentially shaky market. But if you find a great deal, go for it.’
Florence’s tips for how to save for your deposit
Do an overhaul of your finances and allocate yourself strict budgets on food, clothes and other essentials. Cut back on non-essentials and cancel any memberships you’re not using – for example, gym memberships and music subscriptions. Also, if your energy, TV or phone contracts have expired, look into switching to a cheaper deal.
2. Manage your debt
If you have outstanding credit card balances, try to move them to 0 per cent cards. The interest you save will allow you to clear your debts quicker, and save more.
3. Move your savings
Leaving savings in a current account where they can easily be spent is asking for trouble. Set up a direct debit that comes out on payday to move money into a savings account. That way, you won’t be tempted to spend it.
4. Take advantage of schemes
Due to house price increases, the Government has introduced several schemes to make your first house more attainable – for instance, the Lifetime ISA (LISA) allows you to save up to £1,000 a year towards buying a new home.
And of course, keep an ear out for Wednesday’s announcement as a stamp duty holiday could be just the boost your budget needs!