An industry analyst is challenging the long-established agents’ view that reducing or temporarily scrapping stamp duty would help the market.
On the day that Chancellor Rishi Sunak is expected to announce at least a stamp duty holiday for buyers at the mid and lower end of the market, Anthony Codling says cutting stamp duty will not bring any more first time buyers on to the housing ladder, as almost all of them already pay no stamp duty.
Instead Codling - a former analyst at investment bank Jefferies, known for his scathing critique of Purplebricks, and now chief executive of PropTech firm Twindig - says the way to get more first time buyers is to tackle the deposit problem.
“If we take the home costing just under £300,000 the first-time buyer stamp duty is nil but a five per cent deposit is £15,000. Most lenders have stopped offering 95 per cent Loan To Value mortgages during the COVID Crunch with most focusing on 85 per cent LTV which takes the deposit from five per cent or £15,000 to 15 per cent or £45,000” he says.
“Making changes to Stamp Duty will not address the bigger issue of helping first time buyers secure a big enough deposit to get on the housing ladder” he adds.
As a radical alternative, Codling suggests that opening up the current Help To Buy scheme - currently restricted to purchasers of new-build properties - to the whole market.
This would mean, he says, that the 90 per cent of buyers who currently do not choose new-builds would have financial assistance, and the wider market would benefit from the injection of funding that currently goes solely to housebuilders.
In addition, he suggests that the government could also consider underwriting or guaranteeing mortgages so that a lender is at no greater risk for a 95 per cent LTV mortgage than for an 85 per cent ones.
This is vital because Codling believes the key to market success is not gained through a stamp duty cut or holiday, but by enabling more first time buyers.
He puts it this way: “At the lower rungs of the housing ladder, there is a hunger to climb the ladder quickly whereas higher up the ladder as we become settled and put down roots this hunger and enthusiasm is replaced with satisfaction and inertia to stay.
“To sell our first home we need another first-time buyer to take a step on the housing ladder so that we can move up it. If there are no first-time buyers the housing market grinds to a halt.
“At the other end of the ladder, a downsizer needs someone else to trade up so they can trade down. The buyer typically needs to sell their home to buy a bigger one and this kicks off another chain which very often ends up with the need for a first-time buyer to climb onto the bottom rung of the housing ladder to allow everyone else to move up it.”