A new and permanent reform of stamp duty would mean that the tax would be paid by sellers and not buyers.
The call for reform has come from HSBC which found that 85% of non home-owning young adults (18 to 34-years-old) want to own their own home, but only 19% of the 85% expect to be able to do so within the next five years.
And almost half – 45% of aspiring home-owners – do not ever expect to be able to purchase.
In its report, First Time Buyers: Roadblocks and Ways Forward, HSBC found that the younger, 18 to 24-year-old age group was the more optimistic.
Around 22% expect to purchase within five years. However, 21% do not expect ever to be able to purchase.
For each of the past three years there have been around 200,000 first-time buyers, according to the Council of Mortgage Lenders. This is less than half of the 400,000 to 500,000 of those recorded in more typical market conditions, before the credit crunch hit.
The key reasons holding aspiring home owners back from house purchase are:
69% cited “raising the required deposit”
59% cited “insufficient income to support the mortgage.”
27% said “concerns over unemployment”
12% said “concern over future falling house prices”
The current average FTB house price of £136,842 is 6.6 times a young single person’s average earnings of £20,654 (source: Nationwide Building Society and National Earnings Survey).
In order to afford a 90% LTV mortgage, a typical FTB would need to earn £30,800 – 49% higher than current average earnings for a single young adult.
Even then, a 10% deposit of £13,684 is equivalent to 42% of this higher annual income, a major impediment to home purchase without external financial assistance. It is therefore not surprising that 84% of young FTBs are buying with assistance, mostly from parents. This compares to 38% in 2005, according to the CML.
Stuart Beattie, HSBC’s head of mortgages, said: “Our study proves that the aspiration to be a home owner continues to be exceptionally strong. Over 80% of young non-home owners are aspiring to buy a home but are being prevented from doing so due to lack of affordable homes.
“The key to helping buyers back into the market is to help them obtain the cash deposit that responsible lenders require before granting a mortgage.
“To this end, both government and private sector interested parties need to come up with innovative schemes to help aspiring FTBs.”
The report says that government-supported initiatives have helped around 22,000 FTBs a year in each of the last three years.
HSBC is also suggesting that Stamp Duty should be applied to sales, not purchases. This would mean that FTBs would be excused it when the £250,000 stamp duty holiday ends next March.
The bank also suggests that 95% mortgage lending could be deemed prudent, if it could be backed by insurance to cover both lenders and borrowers.
Comments
Toni do you drive a Mercedes or an Aston Martin?
HSBC are so confident with the UK they are moving their operation out of London......??? Bankers!!! dont believe a word they say
Brilliant idea. Bring it on. This will be a major boom and help for FTB and the much nedded stimulus for the proeprty market. This will push sellers to lower prices below the 250 mark which is the levels the FTB go for. Majority of FTB go for properties below 250 mark so this will help the market keep moving. No FTB = frozen property market.
I had always understood that the historic derivation of Stamp Duty was from when a new buyer would ask a government official to "stamp" the deeds of ownership. So from this it would be a strange twist if it was then required for the sellers instead.
As another and possibly more important issue, the high deposit required for first time buyers is a clear signal that house prices are too expensive for almost a whole new generation.
Given the same initial outlay to pay for a deposit and to reduce the debt, increased house prices mean that the increased percentage of debt financing could be a pretty uncomfortable position when the next economic bump comes along.
That's funny about the Barratts ad on HPC. Zoopla were advertising some seriously expensive property there too recently.
Sometimes though these ads are placed automatically in relation to the number of key words that the site displays. Some computer somewhere decides that the word 'house' has been entered so much on HPC that it meets the criteria Barratts have requested for one of their ads to go there.
My Gmail account does the same. Recently I sent an email reminder to someone to buy some batteries to accompany the gift they had just bought. Gmail decided to display an advert for free range eggs next to that message. Took me a while to work out how on earth they made that connection (what's the opposite to free range production?).
BTW if there is an award for off-topic / tangent post of the day, I'll nominate myself...
"Nice to see the owners of HPC have put their morals aside / sold out by selling a banner ad to Barratt today?!"
Moneyweek also picked upon this irony recently but then it does make you worry for Barratt's intelligence paying for advertising space on a website dedicated to lower housing costs. HPC are using Barratts for the revenue and Barratts are using HPC in an attempt to tap-into the FTBs on there.
Great idea – just what the market needs to get it going and get the volume of sales up and running.
So, a bloke at HSBC with access to the press office there has worked out that what we need is to find away of putting more people off selling by adding more cost to the vendors move which they will all want to recover by loading on to the price of their house, that will definitely help.
………………………..genius – someone below mentioned house builders doing it, whoever it was you are right, been going on for years, who remembers when you could move in to a Barratt Home for £99.00? (Nice to see the owners of HPC have put their morals aside / sold out by selling a banner ad to Barratt today?!)
But what do I know, my desk is only 6 feet away from the house buying public, I rarely talk to them and have no idea of what motivates them and the general sentiment out there.
Jonnie
So right Garth. When I was at school 3 times 20 = 60. Seems that someone in the boom made it 120. No big surprise they got a big X later on and were back to the correct answer of 60.
I can still see John Prescott announcing with relish the increase in stamp duty to 3% band "that'll stop you greedy lot from putting your prices up" or something very similar as the treason for the increase near the peak of the boom. Just helped make the North South gap bigger over time.
Interesting how the author missed the bit about where HSBC said prices need to fall by 43% to return to a more sustainable income to price ratio.......?
Ray Evans - "Not everyone thinks they are too high - especially those who scrimped, worked and saved in the past to buy. Things were different then, YOU want to take advantage of this current passing situation and buy on the cheap - to profit in the future? "
Come on Ray how can you say house prices aren't overvalued. They use to be 3 times salary now they are 6-7 times salary.
Lots of us have scrimped and saved years to raise a deposit yet prices are still to high. We are not here to grab a bargain just to buy a home when they fall to affordable homes.
Once you buy a house you don't want it to go up in value unless you add value to it. Rapid house price inflation makes it harder to jump up the ladder.
Rant - You can read it like that if you want to. Properties priced correctly will sell, Properties that aren't, generally wont.
HD - I assume your comment about people not having all the cake and eating it is also applicable to those trying to sell their house.
Rant - I am not worried about FTB's. What people have realised is that they cant have all the cake and eat it.
We have been here a million times before so im not going to bang on.
If people want to buy a house, not just First timers (and unless people have huge amounts of equity) then they have to save up. If the means aspiring to own a house, that means making cut backs.
If people dont have bank of mum and dad and can't be arsed to save, then they obv dont aspire to own that badly.
HD - Don't worry about the opinion of FTBs - Grant Shapps at his recent FTB summit didn't think their views were worth a seat at the table.
@ rantnrave
YOU say prices are too high! O.K the market did overheat to a certain extent but not as much as you think.
Not everyone thinks they are too high - especially those who scrimped, worked and saved in the past to buy. Things were different then, YOU want to take advantage of this current passing situation and buy on the cheap - to profit in the future?
You have your views and I have mine so this is the last post from me for the time being.
Cart or horse first? Builders pay stamp duty and load the price up so what would you do?
The insurance backed lending was how high %age mortgages were obtained years ago so it looks like this dimwit has been looking at some very old advertising brochures.
Probably he has nothing better to do than come up with brainless ideas. Any fool can do that and it seems that this fool did.
Agency and mortgage lending is looked upon as run by idiots and this numpty just proves that it is!
When will our elected dictatorship government change the duty paid to the same way it is calculated on every other duty - in bands. Stamp is unfairly calculated and if applied in bands may just contribute to a more lively market in some sectors and maybe to the governments coffers with a higher number of transactions. Maybe that would be too complicated for them to work out though as this would require the services of an economist with a working brain. Don't see many of them these days.
Ray - besides the small % of the market trying to downsize and bankers, please inform me who benefits from the high house prices you seem so keen to defend.
(For what its worth too, I can afford to buy a house now - I am holding off until I see better value)
I take these surveys they do with a pinch of Salt,
But in the four key reasons above, nowhere does it say that FTB thought current prices were too high.
rantnrave: "(higher wages...) that will do the job too.
The average UK worker is not on the whole enjoying record pay rises right now."
So - you accept the fact that higher wages would make property prices more acceptable. But because your (and my...) boss isn't handing out pay rises, then homeowners should capitulate on their expectations (needs, in many cases...)?
Something doesn't quite compute there, I'm afraid...
Esso hasn't reduced a litre of diesel to 87p. Warburtons haven't brought their loaves down to the same - yet my salary is the same now as it was when these prices were the going rates.
Maybe a sellers stamp duty should be based on the increase in value from purchase to sale, like CGT? Need to think about those with negative equity.
Rant - I think you are looking to much into my post, All I was suggesting is changing % payable. Putting the example has obviously confused things.
Fergus, do you not think if a seller could increase their price they wouldn't? thats nonsence!
Can't really understand the negative in this, the seller is more able to pay, anyway as HSBC repo so many they would be picking up the bill!
the only stamp duty reform we will get will be to rake in more money for our government, Mr Cameron why not simply charge the sellers as well? Remember where you heard it first, its only a matter of time.
Stamp duty isn't the real issue. Yes a factor but not the main one. Property prices are still to high for affordability, Stamp duty is a red herring. Maybe the banks should use there bonus to pay the Stramp Duty for FTB. After all they are being rewarded for failing!
Great, the utility companies can pay my domestic vat too.
What planet are these idiots on? No wonder they got into such a mess.
Anyway Rantnrave, you'll be happy to know our local corporates have started their Spring 'let's over-price every property we see' campaign.
We even had one chap who told us he knew our appraisal was the correct one but he wanted to see if the corporate could get the extra £40K!
@rantnrave
You don't 'get it' do you? If you cannot afford it you cannot have it.
No good bleating all the time. :0)
HD - I think you mean the prices of houses coming down, rather than their value? If their value is going down, that would suggest they are becoming more expensive???
The stamp duty should remain with the buyer. All of these hairbrain schemes that are being thrown out there wont resolve things.
What would be a lot better, which I have been saying for years is that stamp duty needs to be re-structured, with only paying the 3,4 or 5% on the difference, and not the whole amount.
As the huges losers are the homeowners on the cusps, that have homes that are worth £265k or £525k for example, that have their valued decreased because buyers dont want to stump up the extra stealth tax (which is fair enough has its lining the governments pockets)
Pee Bee - that will do the job too.
I've tried asking my boss though - would you like to ask him on my behalf as well?
The average UK worker is not on the whole enjoying record pay rises right now.
rantnrave:
"With houses costing an average of 6.6 times their average salary, first time buyers do not need a 'hand' or 'innovative lending solutions' to get on the housing ladder - they need lower prices."
...or higher wages, maybe?
Sorry for pointing out the obvious, and all... ;o)
Ray - do you need a Rolls Royce to live in?
You aren't perchance a member of the boomer generation / an EA in London whose job is being supported by wealth from dubious sources?
This idea is stupid in so many ways, however, if a tax is to be levied on sellers it should be a small 1 or 2% CGT, that way it would encourage home owners to reatin equity in their houses rather than re-mortgaging it out to buy cars etc in the good times, and protect them from SD in the bad times when they have no equity
Just a thought
@rantnrave
I see you are on your usual 'hobbyhorse' again.
On a lighter note, will you please start lobbying for lower prices on a Rolls Royce as I am a FTB and cannot afford one at the current prices :0)
With houses costing an average of 6.6 times their average salary, first time buyers do not need a 'hand' or 'innovative lending solutions' to get on the housing ladder - they need lower prices.
In fact, it would be beneficial to them if the government and others stopped intervening in the housing market full stop, with SMI, the First Buy Direct scheme and ZIRP all acting to put an artificial floor under current prices.
Which would help FTBs more, a return to 100% (and more) LTVs or 20% lower prices? There is a lot of pent-up demand out there (and supply). Lower prices are the fastest way to see that demand realised.
I'm not trying to be antaganostic here, but with FTBs priced-out of the market, EAs are surely going to feel the pinch. According to Rightmove's latest updates, EAs in my town sold less than a property each in February. Those numbers are not a sustainable business model, shirley?
About time someone supported a fairly obvious lateral thought on how to ease the difficulties of FTBs. Stamp Duty against the Seller really makes sense - in fact is used often as a sweetener anyway when the £250k tipping level is breached.
Another factor is the application of step up duties once the 1% level has been exceeded. There are many FTBs in London who can't even buy a one bedroom apartment for under £250k. They need to be helped too and I think that it would be sensible to apply a fixed percentage of 1% to FTBs no matter what the price level.
test
This is economically identical and I'm amazed HSBC can't work that out! Imagine making a law that VAT had to be paid by the seller, not the buyer. Would the price of your TV magically go down? Needless to say that with stamp duty a seller would just increase their asking price by the equivalent amount and so the tax goes from buyer to seller to the taxman. Nonsense.