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Stamp duty cut for first-time buyers 'urgent'

Wednesday, 5 March 2008 12:00 AM

The New Homes Marketing Board (NHMB) is calling on the government to scrap stamp duty for first-time buyers.

With chancellor Alistair Darling's first budget just days away the organisation - which promotes the activities of housebuilders to consumers - views the reduction as a matter of urgency.

"As I have said many times in recent years, existing stamp duty levels are in need of major review and I urge the chancellor to take the forthcoming budget opportunity to get rid of stamp duty for first-time buyers," said David Pretty, chairman of the NHMB.

"It would be a welcome boost to hard-pressed youngsters and also to the wider housing market."

According to the organisation the current threshold - which starts at one per cent above £125,000 and rises to three per cent over £250,000 - represents a regressive tax on those who can least afford it.

NHMB research finds stamp duty adds an average of £1,750 to the cost of a first property, with the figure increasing to some £7,500 in parts of the south-east and London.

"Increasing the threshold to £250,000 for first-time buyers would take the vast majority of them out of this tax trap and provide a much-needed fillip to their stretched financial resources. What's more, the threshold should be reviewed every five years to ensure it stays in line with inflation," continued Mr Pretty.

"I believe this stamp duty burden on young buyers needs to be tackled decisively, just as it has been recently in the Republic of Ireland."

Stamp duty in Ireland was reformed last year following similar pressure.

Under the new system seven rates were replaced with two: a seven per cent charge on properties from ?125,000 (£94,000) to ?1million (£760,000), and a nine per cent rate above ?1million.

Without such a change first-time buyers may miss the potential benefits of a potential moderation in UK house prices.

Any advantage in falling prices - which might normally ease the situation for young homebuyers - could be cancelled out by the recent tightening of lending criteria and reduction in funds by lenders who consider first-timers a high-risk group.

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