Incentives stoke the market
Last Autumn, the Chancellor, Philip Hammond, put property at the very core of his Budget, abolishing Stamp Duty Land Tax for first-time buyers.
Despite pressure – not least from property solicitors and estate agents – for total reform of the whole stamp duty system, the Chancellor chose to make Generation Rent his priority. As a consequence, anyone buying a first home of up to £300,000 is now entirely exempt from stamp duty and that will mean probably something like 80% of all first-time buyers will escape stamp duty altogether.
On the basis that any first-time buyer of a property valued at up to £500,000 will not be required to pay the tax on the first £300,000 then as many as 85% of first-time buyers in London will also escape the tax.
We can only look upon this development in a positive light and it comes on the back of first-time buyers hitting an 11-year high last year, the number of new home owners totalling more than 365,000, the highest since 2006 and up 7.4% on 2016.
Stamp duty incentives are currently key to a sluggish new-build market and discounting the price of a new property by paying the stamp duty for the buyer is becoming more and more common for developers.
Of course, incentives like this are offered to buyers across the board and regardless of income or status.
Another growing incentive for buyers to enter the new-build market is the part-exchange option offered by some large developers, such as Taylor Wimpey, under which they offer to pay a buyer ‘market price’ for their existing property.
Some developers are even offering incentives to buy-to-let investors, for example a 6% net yield for the first two years from completion. That is an attractive offer in a declining buy-to-let market, developers offering to cover rent shortfalls and service charges, for example.
If you look around carefully then you will find all sorts of incentives to buy property from cars, iPads, electrical goods and even membership of private clubs!
Just a word to the wise, however. Do not become distracted by the incentives and always focus on the real value of the property that you are buying!