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- Theresa May’s government has vowed to address Britain’s housing crisis – particularly the struggles faced by young people.
- Philip Hammond’s Budget pledged to scrap stamp duty for first-time buyers buying property worth up to £300,000.
- However, OBR analysis shows the chancellor’s plan will help just 3,500 people and cause house prices to rise.
LONDON – Philip Hammond today announced that stamp duty – the tax people pay when they buy a new home – will be cut for all first-time buyers buying properties under £300,000.
The Treasury boasts that the policy, which is designed to help young people struggling to get onto the housing ladder, will help a million people and save the average first-time buyer £1,660.
However, if you dig into the details it’s clear that the policy will actually have the reverse of its intended effect.
According to analysis by the official independent government spending watchdog the Office for Budget Responsibility, cutting stamp duty will create just 3,500 extra purchases by first-time buyers across the whole country – far lower than the figure claimed by the government.
As Torsten Bell from the Resolution Foundation has noted, this works out at around £900,000 of public money spent for each additional purchase, which means that it would literally be cheaper to buy each of the 3,500 homebuyers a new house.
And while those few thousand buyers may be grateful, the OBR also found that in the medium to long term the cut will simply lead to house prices rising well beyond any initial saving to purchasers, with existing homeowners being the main beneficiaries.
According to their analysis: “A temporary relief would feed one-for-one into house prices, but a permanent one will have twice that effect. On this basis, post [stamp duty] prices paid by first-time buyers] would actually be higher with the relief than without it. Thus the main gainers from the policy are people who already own property, not the FTBs themselves.”
So, in other words, a policy apparently designed to make it easier for millions of young people struggling to get onto the housing market, will in reality simply make their situation even worse.