Three-month warning for first-time buyers | Personal Finance | Finance
Young buyers are racing to buy properties in higher-priced areas ahead of a change to stamp duty that will add thousands of pounds to the cost. The move follows a decision by the Chancellor, Rachel Reeves, not to continue a stamp duty holiday, which reduced charges under the property tax, beyond April 1 next year. The changes mean:
* The nil rate threshold for paying stamp duty which is currently £250,000 will return to the previous level of £125,000.
* The nil rate threshold for first-time buyers which is currently £425,000 will return to the previous level of £300,000.
* The maximum purchase price for which First-Time Buyers Relief (a reduced stamp duty rate) can be claimed is currently £625,000 and will return to the previous level of £500,000.
The net effect of the changes means that, for example, a first-time buyer purchasing a property at £425,000 who currently pays no stamp duty will be charged £6,250 from April 1, 2025.
The bill will be higher still in those parts of the country where average house prices are higher and it is these areas which are seeing a surge in young people trying to push through a purchase before the April deadline.
New real-time analysis from the property sales portal Rightmove has found early signs of first-time buyers rushing to beat the stamp duty deadline in higher-priced areas of England.
The changes mean that only eight per cent of homes for sale will be stamp-duty free for first-time buyers from April. And the figure is just 24 per cent in the South East, and 32 per cent in East of England.
First-time buyers in London hoping to purchase an average price house at £531,212 are set to be worst affected, having to find an additional £11,250 when the changes take effect.
It currently takes an average of five months (151 days) to complete a property transaction after agreeing a sale, which means first-time buyers would need to beat this average if they are to complete before April 1.
Rightmove said that before the Autumn Budget, first-time buyer demand in London was 28 per cent ahead of last year, and this has now increased to 31 per cent ahead.
In the East of England, the trend has moved from +28 per cent to +32 per cent ahead of the same period last year since the Budget, and in the South East, first-time buyer demand has ticked up from 23 per cent ahead of last year pre-Budget, to 24 per cent ahead post-Budget.
The upward trend compares with most other areas of England that have seen a decline in demand since the Budget, except for the North East.
Rising stamp duty charges are likely to have less impact in areas where there is already a wide availability of homes below the £300,000 threshold. More widely, there was little market support announced in the Budget to help first-time buyers, which could be contributing to some pulling back.
Tim Bannister, Rightmove’s property expert, said: “With stamp duty thresholds in England lowering from April, we’re seeing early signs of first-time buyers reacting.
“In London and higher-priced areas, where first-time buyers are most likely to be affected, we’re seeing some pull forward their plans to try and avoid higher charges.
“In most other areas of England, which have a greater availability of stamp duty-free homes for first-time buyers, we’re seeing the opposite trend of some first-time buyers taking a pause for breath with no further help announced in the Autumn Budget. However, the long-awaited second Bank Rate cut should hopefully boost optimism amongst movers and help to improve affordability during 2025.”
Laura Suter, director of personal finance at AJ Bell, warned: “A decision by Labour not to extend temporary cuts to stamp duty rates in the Budget means those buying a new home will pay thousands more in tax from next April.
Warning of a property sales rush, she said: “We’ll inevitably see a flurry of people looking to lock in their home purchase before the deadline next March – with estate agents and solicitors braced for some long days ahead of the finish line.”
