Phillip Hammond to help first time buyers… by driving up house prices
The chancellor's key Budget measure received a high 'uncertainty' rating.
Having billed housing as one of the key themes of the Budget, Philip Hammond outlined a series of new measures to fix the UK’s “broken housing market”.
Most notably, the chancellor pledged to abolish stamp duty for most first-time buyers on all properties worth up to £300,000. Under the policy first-time buyers will also pay no duty on the first £300,000 of properties worth up to £500,000.
Hammond said he wanted "to take action today to help young people who are saving to own a home" and to "send a message to the next generation that getting on the housing ladder is not just a dream of your parents’ past but a reality for your future".
Treasury officials then briefed journalists that the move on stamp duty would benefit around one million first-time buyers and save them £1,160 each on average. But things went somewhat downhill when the hacks turned their attention to the Office for Budget Responsibility.
In a scathing assessment, the OBR said: "We have assumed that the cost of introducing the relief will be to increase house prices - in this case by around 0.3%.... Thus, the main gainers from the policy are people who already own property, not the first time buyers themselves."
The OBR went on: "The costing assumes a small number of additional first-time buyer purchases (around 3,500) but that these will displace other purchases by those who would have bought and paid the main rate of stamp duty. It is also possible that non-first time buyers will abuse the relief. The measure is expected to increase house prices. It receives a high 'uncertainty' rating."
The move raises the spectre of first time buyers seeing their stamp duty saving eclipsed by the rise in house prices within a few months.
Unsurprisingly, campaign group Generation Rent was less-than-impressed with what Hammond had to offer.
“This measure might boost home ownership but will do nothing to reduce the fundamental cost of housing,” said director Dan Wilson Craw. “In areas where first-time buyers are competing with investors for homes, no stamp duty to pay will give them more purchasing power. But where they’re competing with each other it just means they have more cash with which to make an offer. The real winners are people with property to sell.
“Meanwhile, for the millions of private renters for whom home ownership is a distant prospect, the Chancellor has announced a consultation on removing barriers to longer tenancies. But we have no sense of how ambitious the government is willing to be on this, so real improvements in renting still feel a long way off.”