The impact of the stamp duty holiday
In March, the stamp duty holiday ended for First time buyers purchasing properties valued between 125k and 250k.
Any contractor now looking to buy their first property in this banding will be charged 1% of the property purchase price.
This incentive prompted increased activity in the market to secure mortgages before the deadline of March 25th. The press reported a rise of 17% in March compared with the same month last year and a 30% increase on February 2012. About 180,000 buyers benefited from not paying Stamp duty since its introduction in March 2010.
The motivation behind the stamp duty holiday was to increase the number of first time buyers in the market that struggle with the associated costs involved with buying their first home. Many contractors that are First time buyers fit into this price category so, in theory, should be tempted to take advantage of a maximum saving of £2,500 based on a purchase price of £250,000. The reality, however, suggests that the success of the holiday did not meet with expectation.
Many industry experts and commentators are of the opinion that the incentive created an ‘artificial spike’ as buyers rushed to conclude transactions during March. Prior to March it is questioned how effective the two year concession had been for first time buyers. Chancellor of the Exchequer George Osbourne said that it had been ‘ineffective’ in increasing first time buyers.
The success of the incentive may have been clouded by the increasing difficulties contractors face attempting to obtain mortgage funding, as banks increase rates and tighten qualifying criteria.
March also saw house prices drop by 1%, the biggest fall in two years. This coincided with the increased number of First time buyers making offers on property to ensure they completed before the stamp duty deadline.
At the moment it is premature to forecast if there will be continued growth following the closing stages of the holiday. It is, however, impossible to ignore that even if the incentive had been largely unsuccessful, it almost certainly contributed to the positive increase in contractor property purchase activity and decline in house prices, leading up to its withdrawal.
Article by: Ben Goble, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager.
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