Already being dubbed the ‘rabbit in the hat’ of the Chancellor’s Winter Budget, Mr Hammond said he made the radical decision to scrap stamp duty reserve tax (SDRT) on all homes valued up to £300,000, in an attempt to “make the dream of homeownership a reality once again”.
In addition to slashing SDRT entirely up to £300,000 the Chancellor said the measure will also apply to the first £300,000 of a house purchase in London up to the value of £500,000.
It will effectively give first time buyers purchasing in high value areas a £5,000 discount.
It means 95 per cent of first-time buyers will see at least a cut in the amount of stamp duty, with 80 per cent paying none at all.
The Chancellor said: “When we say we will revive the home-owning dream in Britain we mean it.
“We do not underestimate the scale of the challenge. But today, we have made a substantial downpayment.”
Mr Hammond also announced measures to build an extra 300,000 homes by the mid 2020s in what Mr Hammond said was the biggest annual increase in housing supply since 1970.
But critics said there were still not enough houses being built and the drop in stamp duty is merely increasing demand and will push up prices.
His announcement even attracted expletives from the Labour party with David Lammy accusing the Conservatives of doing “f*** all” to address the housing crisis.
Claire Walsh, chartered financial planner at Aspect8, said: “Stamp duty been a substantial drag on the housing market for years and the abolition of this tax should get people moving again, with a welcome boost to first time buyers, and a nod to those buying in our capital.”
Budget 2017 sees stamp duty abolished
Lynda Clark, CEO of First Time Buyer Group said: “It is about time that stamp duty was abolished for first time buyers purchasing a property under £300k; it has been an enormous stumbling block for those on the lowest rung of the ladder.
“This will not only help tens of thousands of first time buyers to take one step closer to homeownership, but it will help make other transactions further up the ladder possible. We should not forget that first time buyers are the lifeblood of the property market and by increasing incentives for buyers at entry level, the whole property cycle can function, providing a much-needed boost the market as a whole.”
However, some commentators believe the move is not as radical or helpful as it may seem, with first time buyers the least effected by stam duty and their tax revenues not as valuable to the Treasury as those further up the value chain.
Anthony Rushworth, founder of housebuilding investment platform Homegrown, said: “There are plenty of reasons for first-time buyers to be jumping for joy on the face of it but, in reality, they only pay Stamp Duty of £1,500 on average.
“Sparing them from this tax might not cause the Exchequer any loss of sleep but all this will likely do is feed into higher prices for the narrow band of properties they are fighting over.
“This is the problem with strategies that boost demand without addressing the fact there are too few homes being sought by too many buyers.”
The move will cost the Treasury a total of £3.2 billion, rising from £125 million in 2017/18 to £560 million in 2018/19 and finally to £670 million in 2022/23.
Mark Hayward, chief executive, NAEA Propertymark said: “The announcement today from the Government to abolish stamp duty for first time buyers will have a positive impact on the market. It’s a smart move to ensure the dream of homeownership for young people can become a reality and will help buyers across the UK, including London and the South East where property prices are higher.
“We do however need to realise that this move will increase the demand for first time buyer properties and if we don’t have the supply it will push prices up. We have seen this in areas where Help to Buy is offered, as it attracts a great deal of interest from first time buyers.
“In terms of the Government’s plans to build 300,000 new homes a year, it is yet another pledge to increase the number of new homes created. While we welcome this news, we have historically had these announcements from Government to accelerate housebuilding which has not been delivered. It is not a question of ‘how many’, it’s a question of ‘how’.”
Philip Hammond delivering the 2017 Budget
Dan Hegarty, CEO and founder of digital mortgage broker Habito, told house buyers to use their extra “windfall” to top up their deposits.
He said: “For those who have already saved their stamp duty monies, this is an unexpected windfall. Tempting as it may be to use this money elsewhere, many would make best use of it by topping up their deposit.
“A larger deposit opens up the number of mortgage products to choose from, including those with lower interest rates. This could lead to savings that far exceed the extra initial outlay, over the long term.
“Today is a better time to buy than yesterday so it’s absolutely worth talking to a broker, to see how you can translate that stamp duty saving into a better mortgage.”
Labour leader Jeremy Corbyn backed the abolition of stamp duty for first time buyers because it was another Labour policy in its manifesto in June.
Jeremy Corbyn said the stamp duty reform was Labour’s idea
David Lammy was less supportive, sending an expletives-filled tweet attacking the Tory Government.
After Asra Shakoor, chief of staff to Communities Secretary Sajid Javid, welcomed the axing of the tax on properties of up to £300,000, the Labour MP wrote: “Sorry to break it to you but you’ve done absolutely f*** all to address the housing crisis, cutting stamp duty just gives rich people with Bank of Mum and Dad deposits a bit more cash in their pockets.”
Mr Lammy subsequently tweeted: “Getting rid of stamp duty does nothing to increase the supply of affordable homes or council homes or deal with soaring rents. All it does is give a nice cash bonus to those with a Bank of Mum and Dad deposit.
Cash for house-building will include a £630 million small sites fund; £2.7billion to more than double the Housing Infrastructure Fund; £400 million for estate regeneration; a £1.1 billion fund to unlock strategic sites; £8 billion of new financial guarantees to support private house-building; and an additional £34 million to develop construction skills. Target of building 300,000 homes annually to be met “by the mid-2020s”.