So is it time to cancel the removal van and stay at home with Mum & Dad or help finance the continuing boom of the rental market?
With the Stamp Duty holiday now over as of the 24th March, where does that leave the first time buyer and the mortgage market in general?
First the figures. Recent analysis from HSBC revealed nine in ten first-time buyers have not had to pay the housing tax over the past two years. Over the first 21 months of the stamp duty holiday to the end of last year, nearly 90% of first time buyer loans were for properties under the magic £250,001 and just over 55% of the 290,000 buyers fell into the £125,001 to £250,000 band and benefitted from the stamp duty holiday, saving between £1,250 and just under £2,500 each.
However looking at the CML figures from 2005 to 2011, we see that although house purchase as a percentage of all transactions has increased from 43% in 2005 to 53% in 2011, first time buyer (FTB) transactions have consistently hovered around 38% of all house purchases.
So it appears that the much lauded boost of the stamp duty holiday relief is not being reflected in the market figures. Of course there has been an unseasonal bump in the last few weeks as buyers rushed to grab a 1% ‘deposit’ from the government before the 24th of March. But then one would reasonably expect a corresponding drop of FTB transactions over the coming months.
If we then look at the HMRC analysis, ‘Evaluating the Impact of Stamp Duty Land Tax First Time Buyer’s Relief’, published in November 2011, the real value of the relief comes under serious scrutiny.
I am aware of the phrase often attributed to Disraeli: “There are lies, damn lies – and statistics.”, however, the methodology described and used in the HMRC paper does appear sound.
Distilling the 36 pages of reasoned analysis of the initial 13 months of the holiday; a political investment of £150 million of the Exchequer’s coffers appears to have had little impact.
When adjustments for other factors are added into the calculations, the estimated increase in additional FTB transactions due to the relief in the £125,001 to £250,000 price bracket, ranges from 0% to 2%. Which equates to an increase of between zero and 2,000 in transaction volumes.
Furthermore, the study adds that empirical results suggest that the relief may have increased the average price paid by FTBs in the £125,001 to £250,000 price bracket by around 0.5‐0.7 %, when compared against the average monthly price paid by non‐FTB in the same price range.
So it appears that at best the taxpayers have given a number of FTBs a small subsidy to keep the status quo, but no kick start for the whole mortgage market.
Mission accomplished? It would appear not – unless that mission was purely to be seen to do something, anything…