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First Time Buyer Stamp Duty Cut: Impact On Rental Market

It is always important to bear in mind that the property market and the rental market are closely linked in the United Kingdom. There will be times when you need to look at one in isolation but equally, if a major change impacts on one of the markets, you may see a change occurring in the other. It would be fair to say that the first time buyer stamp duty cut will likely have an impact on the rental market in the UK.

The Autumn Budget of 2017 saw the Chancellor announced that there would be a removal of stamp duty for all first time buyers on property less than £300,000. For property priced between £300,000 and £500,000; the first £300,000 would be discounted. There was initial praise for this move with many people thinking that it would assist first time buyers’ step on to the property ladder.

Some have predicted the cut will lead to higher property prices

It didn’t take long until there was a response though and the Office for Budget Responsibility stated that they expect this cut in stamp duty to actually lead to an increase in property prices. This means that some first time buyers will not see any financial benefit from the stamp duty cut, with the price increase cancelling out the removal of stamp duty.

In this regard, you could argue that there is no real difference and that there will be no change to the property or rental market. However, it should be noted that the removal of stamp duty takes away an upfront cost of buying property. This, theoretically, should help first time buyers to save a larger deposit, and this could be a very important factor. With a larger deposit, some buyers will have access to a more attractive mortgage while other buyers may find that they are now accepted for a mortgage application.

Some people may be able to obtain a better mortgage

If more people are able to obtain mortgages, you can see that there would be a fall in demand for rental accommodation and if this occurs, it could lead to a fall in prices. Then again, if more people are buying homes, the available stock for rental options may become lower, which means that there wouldn’t be a drop in prices. Given that there have been recent changes which have strengthened the criteria imposed by many mortgage lenders; this cut may just nullify the recent movement, resulting in very little change in the market.

Given that there are so many factors influencing the property and rental markets in the UK, it is extremely difficult to make predictions with any confidence. At this point in time, a lack of suitable housing and Brexit are more commonly cited as factors that influence the market, certainly more so than the recent cut in stamp duty, so there may not be too much of a change that can be attributed to this movement.

If you are keen to stay in touch with all the latest property and rental market news, make sure you stay in touch with Geoffrey Matthew. 

28/12/17

First Time Buyer Stamp Duty Cut: Impact On Rental Market

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