Budget Boosts Housing Market
The strategy of stimulating the housing market by providing a direct incentive for First Time Buyers to step on the ladder was announced in today’s budget.
All first time buyers buying a property with a value up to £250,000 will save up to a maximum of £2,500 that they would otherwise have paid to the government in tax. For those buyers struggling to save for a deposit, that will be a massive help. One of the key things we have yet to find out is how long the suspension of this tax for first time buyers will last. If the stamp duty holiday is for a limited period, it will drive first time buyers to take action now; if there is no timetable within which first time buyers have to make their move, it will have little impact.
Meanwhile The Chancellor has confirmed that the tax on properties being purchased at or above £1 million will increase from its current level of 4% to 5%. Many harbingers of doom are saying that this will be a blow to the housing market, but we would argue that it is not a blow. A buyer paying £1,000,000 for their new home was already going to have to pay £40,000 in stamp duty and is now going to have to pay an extra £10,000, probably less than the price of the home cinema they wanted to install.
Meanwhile many vendors keen to sell property at £1 million or above may be more than willing to reduce their selling price by £10,000 to achieve a sale, so it may not cost the buyer any more. However, the effect is a positive one.Buyers and sellers at the top end of the market will be helping first time buyers buy at the bottom and without this activity then none of the market can move forward. After all there are far fewer buy to let investors buying property to release first time sellers to move up the housing ladde, so we need first time buyers to come in and release these first time sellers to drive the middle and upper levels of the market.
All in all, we at Thornley Groves welcome this change; some pain at the top of the market but the revenues will be used to fuel the flames that are needed to make the housing market warm up again, and that is good for carpet sellers, kitchen companies, conservatory sellers, and the raft of businesses that supply products and services to individuals whose expenditure on such items peaks at those times in their life when they move home. With a more active housing market the whole economy will benefit.
Thornley Groves Estate Agents
13:12 Wednesday 24th March 2010.