The recently released analysis from Rightmove indicates that first-time buyers in more expensive regions of England are making a push to purchase properties before the upcoming stamp duty changes take effect on 1st April 2024. This is largely driven by the Autumn Budget announcement that the stamp duty exemption threshold for first-time buyers will drop from £425,000 to £300,000.
Key Details:
- Current Policy: First-time buyers currently benefit from a stamp duty exemption for properties priced up to £425,000.
- New Policy from April 2024: The threshold will be reduced to £300,000, meaning buyers purchasing properties priced between £300,000 and £425,000 will face stamp duty charges for the portion above £300,000.
- Market Impact: The change has prompted a surge of activity among first-time buyers seeking to complete transactions before the deadline. This is particularly noticeable in higher-priced areas where properties typically fall within the soon-to-be-affected price band.
Implications:
- Increased Competition: The rush to buy before April may lead to heightened demand and potential price competition in the coming months.
- Post-Deadline Slowdown: There could be a drop in activity for properties priced between £300,000 and £425,000 after the new thresholds take effect, as buyers might face additional costs.
- Market Accessibility: First-time buyers with smaller budgets may be encouraged to consider more affordable areas or compromise on property features due to the reduced exemption.
This policy shift reflects the government’s effort to address affordability challenges while potentially curbing house price inflation in higher-priced markets.
The changes to stamp duty thresholds are poised to impact first-time buyers disproportionately, particularly in higher-priced regions like London, the South East, and the East of England. Here’s a closer look at the trends and implications:
Regional Impact:
- London: From April, only 8% of homes in the city will be stamp-duty-free for first-time buyers, creating significant pressure to act now. First-time buyer demand has already risen, moving from +28% year-on-year before the Autumn Budget to +31% after the Budget.
- South East: The proportion of stamp-duty-free homes will drop to 24%, with demand ticking up from +23% to +24% compared to last year.
- East of England: With 32% of homes remaining exempt, this area has also seen an increase in demand, climbing from +28% to +32% year-on-year since the Budget.
Broader Trends:
- Declining Demand in Other Regions: Most other areas of England, except for the North East, have experienced a dip in first-time buyer demand since the Budget announcement.
- Affordability and Inventory Matters: The impact of the stamp duty threshold cut is less pronounced in regions where a larger proportion of homes are already priced below £300,000. This reflects how localized housing affordability shapes buyer behaviour.
Challenges for Buyers:
- Transaction Timelines: With the average property transaction taking 151 days (5 months) to complete in Great Britain, first-time buyers must act swiftly to close deals before the April 1st deadline. Delays could leave buyers exposed to higher stamp duty charges.
- Lack of Budget Support: The Budget offered little additional assistance for first-time buyers, potentially discouraging those in less impacted areas.
Implications for the Market:
- Short-Term Surge: A rush of demand is expected in the months leading up to April, particularly in higher-priced regions, as buyers try to avoid the additional costs.
- Potential Slowdown: After the threshold cut, demand for homes between £300,000 and £425,000 might drop, especially in areas where the changes will bite hardest.
- Regional Disparities: While buyers in the North East and other affordable regions may see limited changes, those in London and the South East could struggle with affordability further.
These dynamics underscore the importance of acting quickly for those aiming to benefit from the current exemption and avoiding the new stamp duty charges.