My wife and I are thinking about climbing up the property ladder and buying our second home. We have a budget of roughly £450,000 and have been to see one or two homes we are keen on.
However, I noticed rumours are swirling about a potential axing of stamp duty on property sales under £500,000 – for all buyers, not just first-time ones.
We’d be at the upper end of the scale – if we bought somewhere for £450,000, we’d be looking at £12,500 on stamp duty – I’d much rather this was zero. So, should we hold off? How likely is it to happen?
Furthermore, would it have an instant knock-on effect to prices? As in, would more people be willing to buy, creating more demand?
Time for change: Mr Johnson has told MPs that an overhaul of stamp duty is needed
MailOnline Property expert Myra Butterworth replies: Speculation around changes to stamp duty has intensified following the change in the Conservative leadership.
Within days of Boris Johnson becoming the new Prime Minister, it was announced that an overhaul of stamp duty was being planned.
It has been reported that the shake-up could come as soon as September when the new Chancellor is expected to hold an early emergency Budget.
Mr Johnson has told MPs that an overhaul of stamp duty is needed to help first-time buyers get on the ladder and to give the London property market renewed energy.
One proposal being looked at would raise the property value at which stamp duty is charged from £125,000 to £500,000.
Another more radical measure is to switch the liability for paying the levy from the buyer to the seller.
First-time buyers are already exempt from paying the charge on homes bought for less than £300,000, but this would remove buyers up to £500,000 from the system entirely.
We put your question to two experts:
Jonathan Harris, director of mortgage broker Anderson Harris, says: Boris Johnson’s proposed stamp duty changes would be a boost for buyers – in your case saving you the not-inconsiderable sum of £12,500.
But even if they do happen, and it is an ‘if’, it is hard to see them happening any time soon.
It is fair to say he’s got a lot on his plate with Brexit and that is likely to absorb most of the Government’s attention for the next few months at least.
Putting off buying a house in the hope that stamp duty changes will come may just not be practical for buyers who need to move for a specific reason – for schools, job relocation or because of divorce or bereavement.
It sounds as though you need more space – can you wait what may end up being more than a few months for that until we see what happens?
Given the shortage of stock, if you have found a property you wish to buy, it may be wise to get on and do so rather than holding off and waiting.
Otherwise, you may find that property is snapped up by someone else, and it may be a long time before you find another one.
One proposal being looked at would raise the property value at which stamp duty is charged from £125,000 to £500,000
You are also wondering about whether the changes would lead to an increase in property prices.
There would certainly be more buyer demand but whether more sellers put their homes on the market is another matter.
We may find increased demand but not more supply, which could lead to higher prices, so it ends up costing you more, wiping out any potential stamp duty savings.
There is so much uncertainty and you can’t rely on stamp duty reform happening at all.
Even if Boris Johnson gets Brexit through, has a general election, wins and gets a bigger majority, he may still decide not to reform stamp duty.
He may not even be in power in a few months, we just don’t know.
If you have been looking for property, you will already have factored in the stamp duty cost and it may be that you just have to swallow it and pay it.
It will take a few months for the deal to go through anyway; by which time the stamp duty changes may have come in, so you don’t have to pay.
It is also worth bearing in mind that mortgages are very competitive at the moment, which may not be the case in six months or a year if interest rates start to rise.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: It may not be politically acceptable to bring in stamp duty changes which benefit all buyers in this parliament, given the government’s wafer-thin majority.
It is more likely that there would be a concession for first-time buyers.
In any event, even if it did happen, the pent-up demand which has been building for a few years since the referendum is likely to wipe out any potential benefit.
This is especially true at the margins, around the £450,000 to £500,000 price point, which is where you are buying.
I would say that you are better off negotiating as hard as you can now, taking advantage of present uncertainty, and do your best to get a better price.
But, of course, this will depend on supply and demand in the area you are looking in.
Delaying your completion is another approach which would keep your options open.
It is unlikely that we will see stamp duty switched to sellers rather than buyers but it would still be healthy to have the debate and a consultation to see whether there is any appetite for it.
It could be a very good idea, but it depends on where the rate is pitched; if punitive, it could be worse than the current system.
What we want is more transactions, rather than boom and bust in prices, which will improve job and social mobility.
Myra Butterworth adds: Stamp duty has become an increasingly contentious issue due to the amount of money it adds to the cost of moving home.
Stamp duty is a tax on properties bought in England and Northern Ireland, and you’ll need to pay it on homes costing more than £125,000 – unless you’re a first-time buyer.
For properties costing up to £300,000, those getting on the ladder for the first time pay no stamp duty.
Up to £500,000, they don’t pay stamp duty on the first £300,000, but do on the remaining amount.
Any purchases above £500,000 attract the normal stamp duty rates on the whole purchase price.
There are several thresholds depending on the prices of the property you buy, and you’ll pay a three per cent surcharge if you’re purchasing a second home or buy-to-let property.
The tax was given an overhaul in 2017. Under the old rules, buyers paid tax at a single rate on the entire property price.
Today, buyers only pay the rate of tax on the part of the property price within each tax band.
Since the 2008-09 financial year, when the housing market was in the grip of the credit crisis, revenue from stamp duty on residential properties has risen from £2.9billion to near £10billion.