Buying a house is becoming even more unaffordable for first-time buyers
The Daily Telegraph reports on Friday that 71% of all first-time buyers now have to pay stamp duty, following reforms brought in by previous Chancellor George Osborne. In 2013 the number of first-time buyers paying stamp duty was just 45%.
In numerical terms over the same period, the number of first-timers paying the tax rose from 121,455 buyers in 2013 to 238,382 in 2016.
Stamp duty is a tax placed on buyers when they purchase a property in the UK. It is payable on completion of the property. Stamp duty is usually 2-12%, depending on the price. Under the new system, introduced in April 2016, it works out at an extra £93,750 if you're buying a property at £1.5 million, according to the government's stamp duty tax calculator. Stamp duty of roughly £13,500 would be applied if you're buying a property at the average price in London of £473,073.
If you own more than one property, a 3% stamp duty is applied. This new fee also came into force in April and is applicable to buy-to-let investors and those who are buying a second home. This 3% fee is on top of the extra cost of a new purchase in April.
Osborne's reforms were ostensibly brought in for people trying to get onto the housing ladder, while penalising those with more capital buying more expensive houses. However, the data suggests that the policy is also having a significant impact on those at the lower end of the market, despite Osborne's claims in 2014 that stamp duty was a "tax on aspiration."
"This is further evidence of how hard it is for young people to get on housing ladder as house prices are so high, and they have stamp duty tax to pay as well," former Conservative Party Minister of State for Universities and Science David Willetts told The Telegraph.
"The time has now come to look at whether stamp duty is working or if the market is gumming up, and also to give the maximum benefit to young buyers."
Housing in the UK, particularly in London, is already highly unaffordable, even before the extra stamp duty hit, although some expect house prices to come under pressure in 2017 because housing has become so unaffordable.
Martin Ellis, housing economist from Halifax, said earlier this week that while prices will be supported by the nation's evergreen problem of a lack of housing supply and cheap credit, demand will be dampened because people are struggling to truly afford buying a property