November 2017

7 min read

Will the Stamp Duty relief bring back first time buyers?

Chancellor Phillip Hammond recently monopolised the housing headlines with the measures he announced in his Autumn Budget.

The first time buyer stamp duty relief was the most prominent item but his threats of compulsory purchase orders to discourage land banking have already had an effect on the markets - and, as often is the case, not in the way he perhaps intended.

Stamp Duty Relief for First Time Buyers

Hammond announced that first time buyers would not have to pay a penny in stamp duty when purchasing any property sold at £300,000 or below, and would effectively get a £5,000 discount on their stamp duty bill for any property priced between £300,001 and £500,000.

Beneath the face of a great headline grabbing announcement lie some less comfortable facts, however. The measure looks predominantly to be aimed at higher-price markets, such as London. For first time buyers living in the North-East, however, where the average price is currently £130,271 (see below), the benefit equates to a mere £105 saving. 

The Office for Budget Responsibility has stated that the tax break - which admittedly should exempt 80% of all first time purchased properties - is likely to increase property prices by about 0.3%, with most of the increase coming in 2018.

Compulsory Purchase Orders

Despite Hammond making a number of other housing-related pledges in his speech, the markets have so far mainly reacted to the part of his speech which concerned a review into why there is a gap between the number of homes granted planning consent and the number actually built. 

He criticised the practice of land banking. This is where landowners don't develop land which has already had planning permission for residential properties granted for it in a speculative hope of future gains from rising land prices. 

Although he merely outlined a review into the practice, shares in large housebuilder companies have already fallen, with Barratt Developments down 3%, Berkeley Group down 2.7% and Persimmon down 1.8%, as large market players reacted to the possible future threat of compulsory purchase orders i.e. the Government forcibly buying land from these companies. 

Other measures Hammond announced included:

  • £44bn of funding loans and guarantees aimed at boosting the housing supply by 300,000 new homes/year by the mid-2020s.
  • £15.3bn of new money included in the £44bn
  • Local authorities being allowed to charge double council tax on empty homes.
  • Borrowing caps for local authorities to be lifted in 'expensive' areas to allow more home building.

Changes in Average House Prices

Source: UK House Price Index - Latest data September 2017

Average sale prices in England & Wales once again rose to their highest level ever, reaching £238,537, up 5.7% on September 2016. However, year-on-year annual average house price growth is slowing: August 2016 saw an increase of 6.5%.

London's prices on the other hand showed a continuing month-on-month fall of 0.2% to £483,568, however they were up 2.5% year-on-year. Once again the annual increase for 2016/17 was less than for 2015/16 when it was 7.3%

The rate at which average house prices are increasing is continuing to slow and accompanies a continuing fall in sales volumes.

Regional Differences in Average House Price Year-on-Year

Source: UK House Price Index - Compare Sep 2017 to Sep 2016

  • London - £483,568 - Increase of 2.5%
  • South East - £324,465 - Increase of 5.5%
  • South West - £252,737 - Increase of 6.6%
  • East Midlands - £184,399 - Increase of 6.4%
  • West Midlands - £189,038 - Increase of 5.7%
  • Wales - £152,661 - Increase of 5.3%
  • East of England - £289,301 - Increase of 5.9%
  • North East - £130,271 - Increase of 4.4%
  • North West - £160,951 - Increase of 7.3%
  • Yorks and Humber - £158,884 - Increase of 5.6%

Changes in Sales Volumes

Source: UK House Price Index - Latest data July 2017

You can see why Mr Hammond needs to take drastic housing market measures. Sales volumes in England & Wales (including London), as noted previously, continue to decline in the wake of the the change to the stamp duty rules for second home purchases, with the exception of a small resurgence in April 2017.

The latest data for England & Wales shows another annual fall of 16.8% to 68,191 sales for July 2017. This is the lowest activity for July since 2012 (59,448).

Regional Differences in Sales Volumes Year-on-Year

Source: UK House Price Index - Compare July 2017 to July 2016 Latest data available

  • London - 6,639 - Decrease of 24.5%
  • South East - 11,722 - Decrease of 17.0%
  • South West - 7,957 - Decrease of 14.8%
  • East Midlands - 6,033 - Decrease of 15.0%
  • West Midlands - 6,481 - Decrease of 13.6%
  • Wales - 3,599 - Decrease of 11.3%
  • East of England - 7,636 - Decrease of 20.5%
  • North East - 2,861 - Decrease of 18.5%
  • North West - 8,639 - Decrease of 17.1%
  • Yorks and Humber - 6,624 - Decrease of 11.9%

London - worst ever July since records began

London's story continues to be one of declining sales volumes: there were only 6,639 sales in July 2017 (down 24.5% on July 2016): this is the worst July volumes figure for the capital ever recorded (the Land Registry started recording monthly sales volumes in January 1995).

The proportion of people aged 25-34 who own their own homes fell from 59% to 37% between 2004 and 2015

Source: English Housing Survey

Remortgages: "New All-Time High"

We've referred to the phenomenon of ever-increasing remortgage figures in previous months' housing market updates and data from one large UK mortgage brokerage gave further evidence of this trend.

Remortgages now apparently count for 39% of all mortgages, according to the brokerage, and the market share is rising 10% year-on-year.

Most experts continue to explain this absolute and relative growth as being caused primarily by homeowners choosing to stay put and reinvest in their properties, such as creating extensions, loft conversions and doing general refurbishment work.

Reinvestment becomes even more attractive compared to moving home when house prices continue to stay high accompanied by the costs of relocating. Additionally, the number of remortgage products is rising, fuelling its own demand within the market, and the prospect of further rate rises adds even more fuel to the fire.

Click if you're looking for a competitive remortgage quote or call us on 0207 112 5388

First Time Buyer Sales Hit 'Eight Month Low'

The National Association of Estate Agents' headline in its latest housing report, for October, stated that the percentage of sales to first time buyers in the month fell to its lowest level since February (22%).

The NAEA's figures also stated an 11% month-on-month drop in demand alongside a marginal increase in the number of properties available. The number of sales agreed remained the same (8 per member branch).

Marginal rebalancing of asking prices data

According to the NAEA, one trend which showed a moderate reversal compared to its prevailing direction in many months was asking prices.

Properties selling for more than the original asking price increased for the first time since July, to 4% per cent. This was also accompanied by a 4% month-on-month drop in the number of homes which sold for less than asking price, from 82% to 78%.

Chief Executive of the NAEA Mark Hayward said:

"First-time buyers have felt locked out of the market for some time and our figures continue to highlight how the problem is only getting worse. However, following the announcement of the abolishment of stamp duty for first-time buyers in last week’s Autumn Budget, we hope to see more first-time buyers coming to the market and making their dream a reality.

""We do however need to realise that if we don’t have the supply to meet the increased demand from FTBs it’s likely we’ll see house prices increase."

Subscribe here to get our monthly Housing Market Update:

* indicates required
We will only ever email you our monthly housing market update; we never release these details to any third party.

Unbeatable Quote
Rated Excellent on Trustpilot with fixed fees and a friendly team to help you. See for yourself - get a no obligation online quote today.

Agree to our Terms & Privacy

Check Availability
We work with local surveyors throughout England and Wales. Why not check our next available date for your area now?

Agree to our Terms & Privacy

Free Appointment
Book a free mortgage consultation with our panel mortgage broker today and see what the best mortgage rates are for you.

Agree to our Terms & Privacy


FREE Online Conveyancing Process For Buyers

Our conveyancing process area includes:
  • online checklists
  • videos
  • free downloads
  • useful tips
It is completely free to use - from start to finish - and saves your progress along the way.