Stamp duty changes widely welcomed by the property industry but experts point to flaws in the system

But analysts indicate it will not revive the market and actually have some negative impacts particularly in London where many more people face paying the higher rate as more properties are worth more than a million.
 
Chancellor Alistair Darling said the change will help nine out of ten first time buyers who still find it hard to get a mortgage. But some people who think they might be classed as a first time buyer might find that they are not, such as a newly married couple where one has owned a property before.
 
And not everyone agrees with Darling’s numbers. According to Martin Ellis, housing economist at the Halifax it will help an additional 40% of first time buyers, somewhat different from Darling’s nine out of ten.
 
The Royal Institution of Chartered Surveyors said the change should result in an increase in transactions at the lower end of the market but it believes greater reform of the system is needed as the impact will be limited by the ongoing lack of housing supply and restricted mortgage lending.
 
‘The current slab structure, where a higher rate applies to the whole value of a transaction, should be replaced with a marginal system similar to income tax. This would smooth out distortions in the market and can be done on a revenue neutral basis. The Government should also consider reshaping the tax by introducing a new band for higher value properties,’ RICS said.
 
The National Association of Estate Agents (NAEA) welcomed the change as a major victory but also said that wider reform is needed. ‘This announcement has added a new rung to the property ladder, one within reach of thousands of young families. We have long argued that stamp duty is a tax on aspiration that smothered the natural demand of the market. We still believe that more reform is needed and there is more work to be done, but this is a good first step, a major victory for first time buyers,’ said Peter Bolton King, chief executive of the NAEA.
 
Liam Bailey, head of residential research at Knight Frank called it ‘a tax on London’ as only 44% of property sales will slip under the new zero-rate band compared average of 74% in the rest of the country. In addition well over 60% of all £1 million plus transactions affected by the new 5% rate take place in the capital,’ he explained.
 
‘The removal of stamp duty for first-time buyers purchasing properties under £250,000 is a welcome move and will benefit the new-build market that has been particularly hard hit by the housing downturn. In some parts of the UK virtually all the housing stock will now be free of stamp duty for first time buyers. For houses worth around £1 million there will be pressure from buyers to pull back asking prices below the new threshold to avoid paying the extra stamp duty,’ he said.
 
According to Charles Beer, senior partner of Real Estate Tax at KPMG, said it may provide a modest boost to the housing market, but doesn’t address the fundamental issues that many first time buyers face in affording deposits and finding suitable mortgages. The measure is also tightly restricted. You do not qualify for the relief if you have ever owned a property anywhere else in the world and it is for two years.