My sister Tasha has moved in with us, tales of her disastrous money management are legendary. Being a much older sister, with two spare rooms, what could I do? So on a snowy Saturday, in she moved, complete with every IKEA accessory known to man! She is a complete disaster to have so close, bags of designer wares are wafted under my nose, my makeup is used and carelessly left strewn over every surface in what can only be described as Armageddon in the family bathroom.
So please imagine my delight upon hearing Alistair Darling announce a two-year stamp-duty holiday for first-time buyers on properties priced up to £250,000. Not having to pay the 1% levy, which used to apply to sales over £125,000, will mean a saving of as much as £2,500. Not a huge sum compared to the other costs of moving, admittedly, but helpful nonetheless: probably enough to buy a few choice pieces from IKEA, a comfortable, bed, sofa and maybe enough for Tasha to buy her own makeup! I passed her the phone to call the bank of mum and dad, deposits are their thing.
The number of first-time buyers has slumped in recent years. In 1999 alone, more than 590,000 people took their first step onto the property ladder; by the peak of the market in 2007, the figure had fallen to 357,000; last year, it was just 198,000. The Council of Mortgage Lenders (CML) estimates that the average person is now 30 before they buy their first home .Tasha is in her twenties, that is way too long for her to be our house guest.
Even modest changes to the tax rate, such as the one announced by Darling, will certainly have an effect — as shown when the government temporarily raised the point at which stamp duty kicks in from £125,000 to £175,000, from September 2008 to the end of last year. The CML found that the number of transactions in the £125,000-£175,000 range last December was an unseasonable. 63% higher than in the previous month but fell back by 80% in January, when the original bands were restored.
The effect this time around may not be so obvious, not least because the “holiday” will be enjoyed only by first-time buyers. This is not only a matter of excluding ‘wannabe’ buy-to-let landlords: if you have already owned a property, not just in Britain but anywhere in the world, you won’t qualify. Combining resources with someone else who has bought in the past is also not permitted.
Even more of a problem is the need to raise a deposit, which could be easily, be £50,000 for a £250,000 home. Although there are signs that lenders are beginning to look more favourably on those unable to lay their hands on that amount of cash, deals open to buyers with less than a 20% deposit are rare — and the fees and interest rates charged are, in most cases, consider¬ably less attractive than those on offer to existing homeowners trading up.
It may be that this stamp duty bonus could be the factor that lands Tasha on the property ladder; all she needs to do is find the right property. We have been looking solidly for the past few days; I can’t say that there is an abundant choice out there. Anything that looks somewhat appealing is snapped up within days of coming on to the market, everything else looks uninhabitable and in need of a lot of work. It could be that we have a temporary surge into the housing market from this but with limited properties coming on to the market, this could be a mini blip that drives prices up rather than wiping any savings on tax.
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