Stamp Duty changes are 'total sham', says Team boss...

The new £250,000 Stamp Duty threshold for first-time buyers has received a mixed reception – whilst next year’s increase to 5% for properties over £1m has been slated.

While the NAEA welcomed the Budget announcement, which gives a two-year tax break for first-timers, as a major victory, some agents said it would have no effect in almost all of the country and was a sham.

Peter Bolton King, chief executive of the NAEA, said: “This announcement has added a new rung to the property ladder, one within reach of thousands of young families.

“We have long argued that Stamp Duty is a tax on aspiration that smothered the natural demand of the market. We still believe that more reform is needed, but we applaud this decision – a major victory for first-time buyers.”

But Neil Parsons, chairman of Team, said: “As with just about everything else this Government does, this announcement looks good on the surface, but once you study the small print it turns out to be a total sham.

“A straight hike in the Stamp Duty threshold to £250,000 for everyone would have been just what the market needed. But by specifically limiting it to first-time buyers, the Chancellor has ensured that it will benefit hardly anyone – except young investment bankers buying their first pad in London. In most other parts of the country, it will do nothing whatsoever for the market.”

He added: “We now have a situation where you go straight from no duty at all on properties costing up to £250,000 to a whopping 3% on anything over that. As for the new 5% rate on properties over £1m, this is clearly just a political hot potato deliberately conjured up to hand to the incoming (probably Tory) Government. I am frankly disgusted by the whole thing.”

Nick Salmon, of Harrison Murray, said: “We welcome the Chancellor’s decision to help buyers at under £250,000 but the increase for properties over £1m is a disgrace. Stamp Duty is an iniquitous tax on moving and restricts mobility. The changes have more to do with politics than with giving real stimulus to the hard-pressed property market. Stamp Duty should be scrapped entirely.”

Liam Bailey, of Knight Frank, called the changes ‘a tax on London’. He said that well over 60% of all the UK’s £1m-plus sales were in London.

Peter Rollings, managing director of Marsh & Parsons, said: “The Chancellor’s measures are not going to help first-time buyers in central London. His changes are just going to tax Londoners and the South-East harder. Only 3% of the homes we have for sale fit into the sub £250,000 category.

“The end of the Stamp Duty ‘holiday’ at the turn of the year did not have a significant impact on the London market, and with so few London properties in the sub-£250,000 threshold – neither will this. But the increased tax payable on a home worth £1m will hit Londoners hard. Lots of flats fit into that category in London. There will be repercussions for the wider property market down the line.”

Eric Walker, managing director of Bushells, also a London agent, said the change would affect less than 5% of his sales.

He also warned: “What is of concern is what happens when we near the end of this Government’s ‘Special offer’. A rush to buy before the deadline expires? Remember the abolition of double MIRAS, which prompted frenzied activity, huge price rises, and then collapse.”

He also said that the new higher Stamp Duty on £1m-plus properties could in fact push prices up beyond the barrier.

According to FindaProperty statistics, there are only two regions – London and the South-East – where the average asking price is currently over £250,000. Throughout the North, where the average asking price is around £150,000, only 14% of properties are priced at over £250,000.

The Council of Mortgage Lenders said the new threshold would probably benefit 136,000 first-time buyers, resulting in foregone revenue of £224m. It estimated that this should be offset by the increase in Stamp Duty to 5% (up from 4%) which is due to kick in next April. There are around 10,000 property transactions in excess of £1m each year, which the CML estimates could equate to around £250m of additional revenue.

However, there is confusion over what a first-time buyer is, with accountants warning it is a tax loophole waiting to happen.

According to the Government, the only buyers who will benefit from the new threshold are people who have never owned, either freehold or leasehold, a property either in the UK or abroad. The Government also said that there will be no exemption for a first-timer buying a house together with a partner who has previously owned a property.

Similarly, anyone buying a property on their own for the first time will not count as a first-time buyer if they have ever jointly owned one before. But tax advisers say that couples could simply buy a property in the name of the one who had never bought before.