Stamp Duty Madness: Government Solves Housing Crisis by Making Homes Unaffordable
Thousands of anxious London first-time buyers are racing to beat the stamp duty deadline, facing extra bills of up to £11,250. Many will miss the completion date deadline to qualify for a discount on their stamp duty bill, leading to additional costs for short-term rentals, storage and moving fees. The extra stamp duty alone is an additional £11,250, and with other costs, the bill could reach £15,000.
On 31 March, generous stamp duty discounts for first-time buyers introduced in November 2017 will come to an end. Any deals that do not complete by midnight that day and fall over into April will be hit by far higher tax rates.
For the last eight years, first-time buyers have paid no stamp duty on properties priced below £425,000. From 1 April, stamp duty will only be waived on properties priced below £300,000. From £300,000 to £500,000, a 5% stamp duty rate applies, and above £500,000, there will be no benefits for first-time buyers.
The result has been a stampede of buyers since October, with mortgage applications shooting up 130% in the last three months of 2024. The increased financial burden will likely deter many potential buyers, leading to a slowdown in the market and a decrease in property prices as demand wanes. However, it will also mean fewer people can afford to buy homes, exacerbating the housing crisis.
Developers are expected to shift their focus towards building one-bedroom flats priced under £300,000, as these will be more attractive to first-time buyers trying to avoid the higher stamp duty rates. Houses will become less appealing for developers, who will find it quicker and more profitable to sell or rent out blocks of flats. This shift could lead to an increase in the number of high-density residential buildings, changing the landscape of the London property market for the next 4-5 years.
The lack of concessions or extensions to the deadline indicates a tough stance from the government, leaving little room for flexibility. This rigidity could lead to a bottleneck in the market, with many transactions failing to complete in time, causing financial strain on buyers and sellers alike.
While the intention behind the stamp duty changes may be to generate more revenue, the immediate impact on the London property market and first-time buyers will be profound and potentially damaging. On the bright side, with fewer people able to afford homes, the government might not need to build those 1.5 million houses after all! The government must consider the broader implications of these changes and provide support to those most affected to prevent a collapse in the market.
