First-time buyers reap stamp duty benefit

First-time buyers are likely to be the key winners of the government's stamp duty reform, according to analysis from Halifax.

Earlier this week chancellor Alistair Darling announced a package of measures designed to spur the housing market, including raising the stamp duty threshold to £175,000.

And it is first-time buyers in particular who will benefit from the change, according to Halifax.

The average price paid by a first-time buyer in the second quarter of 2008 was £144,283 with an average stamp duty bill of £1,443. By comparison, the average first-time buyer will pay no stamp duty over the next 12 months.

Therefore, the proportion of first-time buyers who would have paid stamp duty if the threshold had been £175,000 over the past year would have been 31 per cent rather than the 60 per cent of purchases that were above the existing threshold of £125,000.

As such, Halifax estimates a threshold of £175,000 rather than £125,000 would have removed 80-90,000 first-time buyers from the stamp duty tax net over the past year.

However, it remains to be seen whether savings of roughly £1,500 – less than one per cent of the purchase price – will be sufficient to lure buyers into a falling market.

The plans have also been attacked by the Liberal Democrats.

The party's leader Nick Clegg commented: "The government is… trying to bribe people into buying houses in a falling market.

"The last thing vulnerable first-time buyers need is Gordon Brown sucking them straight into negative equity with the housing market in free-fall."

There is also no mention in the government plans of how first-time buyers are to secure a mortgage in a rapidly contracting market.

Chris O'Toole