The average home in London will see a reduction of around £4,500 on stamp duty costs. Osborne predicted that these measures would mean a reduced amount of stamp duty paid by 98% of homebuyers.
The new stamp duty system means that each rate will only apply to the part of the property price that falls within that band. Under the new rules, no tax will be due on the first £125,000 paid, followed by 2% on the portion up to £250,000, 5% on the portion up to £925,000, 10% up to £1.5m and then 12% on anything above that price.
Many argued that the tax should have been scrapped sooner, with Richard Donnell from residential property market analysis company Hometrack saying that stamp duty "is an inefficient tax and acts as a barrier to market liquidity which is bad for labour mobility. The slab structure of stamp duty does create distortions at the price breaks and these have been around for years. Moving towards a more progressive tax structure will help those looking to get on the ladder and will end up costing those with higher value homes more.”
CML director general Paul Smee comments:
"This fundamental reform has been a long time coming, but better late than never. Although there are losers as well as winners, the vast majority of mortgaged transactions will benefit from lower tax as a result of this move."
The industry also focused on what the news means for first time buyers, with Mark Harris, chief executive of mortgage broker SPF Private Clients noting that "It will make it easier for first-time buyers and struggling families to get onto the ladder or move up it as they will need to set less money aside for stamp duty and can put more towards their deposit."
Alex Gosling, managing director of online estate agents Housesimple.co.uk, agreed saying that stamp duty was "simply hurting the people who needed the help the most - in particular first time buyers who are finding it hard enough to save for a deposit without being bludgeoned over the head with a stamp duty bill."
He added:
"While there are savings for people at the lower end of the property ladder, some might feel these changes benefit the London market, where average property prices are over £500,000, more than anywhere.
"Take a £400,000 property, the stamp duty saving will be £2,000 under the new stamp duty system, while on a £150,000 property the saving will be just £1,000.
"That means someone with a £400,000 property will make a 100% higher saving on stamp duty under the new system.
"It's hard to please everyone, but the changes that have been made are at least a step in the right direction."
Richard Sexton, directer of e.surv, said that "in London the problem was particularly severe: first-time buyers in the capital pay an average of £270,000, meaning most first-time buyers were faced with significant fees before the changes. These extra charges have been pricing many of them out of the market. First-time buyers are already fighting an uphill battle with a lethargic labour market recovery and low savings rates meaning it’s difficult to save for a deposit."
However not all industry experts agreed that the reforms were a good decision for the London market.
Nick Leeming, Chairman of estate agents Jackson-Stops & Staff said that the reforms offer "little incentive for property buyers at the mid to high-end of the market. It is a tax on mansion buyers. This rate of 12% on properties above £5 million will penalise the London market and also hit the country house market, which is still struggling to recover from the recession. However, we welcome the changes on stamp duty at the first-time buyer end of the market as this will help to stimulate activity at that level.”
Michael Bruce, CEO of Purplebricks.com counter-argued, saying that 'house prices in the South East have distorted the national housing market', and that "new changes will not only save potential property owners money but also takeaway the frustration when selling a house of keeping it under the stamp duty threshold."
Mark Harris, chief executive of mortgage broker SPF Private Clients, also agreed that the abolition remained fair for prime properties.
He said:
"Anyone buying a property for more than £937,000 will pay more stamp duty under the new bandings, with the increases becoming more dramatic the greater the value of the property. The result will be a much fairer system, although there will be a flurry of high-end exchanges today to beat the changes.
"While the changes will hit wealthier buyers in the pocket, they have to be fairer than a mansion tax as it's only a hit that is taken once. It will fundamentally change the way we view our homes: people will think much harder about moving as they are likely to stay put for a number of years. Big moves will be the order of the day rather than several staged moves, particularly for more expensive properties."
Jennet Siebrits, Head of Residential Research, CBRE UK, welcomes the reforms, but is disappointed that the Government has done little to address the massive shortfall in new-build housing, stating that "until the supply of new homes is properly addressed we will do little to solve the fundamental housing problems Britain has.”
