One-fifth of first-time buyers, and more than one-third of those in London, are changing the location of their property searches to pay less or no stamp duty, research has found.
The findings suggest the government’s move last year to abolish stamp duty for first-time buyers on the first £300,000 of any home costing up to £500,000 has influenced buyers’ decision-making about where to buy and what they can afford.
The research by L&C Mortgages, a home loan broker, revealed that some people — 18 per cent of first-time buyers — were calibrating their purchases to take advantage of the tax relief by buying beneath the exemption threshold.
When Philip Hammond, the chancellor, announced the first-time buyer measure in his Budget last November, the Office for Budget Responsibility said it expected the relief to boost house prices by 0.3 per cent based on the impact of a stamp duty holiday in 2010.
“Since the relief frees up first-time buyers’ savings to put towards higher deposits, these higher prices can be paid,” the OBR said in November. The L&C research suggested such behaviour is the exception. Only 7 per cent of first-time buyers in the survey said they would buy a more expensive property using savings made from the tax break.
However, the survey also found evidence of a lack of understanding among aspiring buyers of how the new rules worked and what savings they delivered. Almost one-third of English first-time buyers did not know or were unsure whether the new stamp duty rules would benefit them when they bought their first home.
Some 47 per cent of people planning to buy a property for less than £125,000 thought they would benefit from the stamp duty relief — suggesting they were unaware that purchases of that value were already below the stamp duty threshold even before the reforms were announced.
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