Home start as new housing measures introduced

11:06am Wednesday 3rd September 2008

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Will scrapping Stamp Duty for cheaper homes and providing more help for first-time buyers be enough to kick-start the housing market? STEPHEN LEWIS reports.

FROM today, anyone buying a house worth £175,000 or less will save themselves up to £1,750 in tax.

Stamp Duty, the tax levied on the sale of homes, has been scrapped for a year on all properties valued at £175,000 or below – saving buyers of such homes one per cent of the price of their new home.

The much-heralded move is part of a package of measures the Government hopes will revive the housing market.

At the same time as the Stamp Duty exemption was being announced, Community Secretary Hazel Blears was announcing her own £1 billion programme to help first-time buyers and those struggling to pay their mortgages.

The measures include:

* £300 million for a “shared equity scheme” to enable first time buyers get a foot on the housing ladder by buying a share of a home.

* A £200 million mortgage rescue scheme to help struggling homeowners faced with the threat of repossession.

* A £400 million boost for social housing providers, such as councils and housing associations, so they can deliver an extra 5,500 homes over the next 18 months.

But will the latest attempt to breathe new life into the housing market work? We asked a seller, a first-time buyer, a shared owner and some experts.

The seller

AS SOON as he heard about the changes to Stamp Duty, Philippa Howe’s husband, Keith, was on the phone instructing his wife to tell the estate agent to drop the price of their three-bed semi off Boroughbridge Road to just under £175,000.

Whoever buys the house should save nearly £1,750 – and it could just make the difference, Philippa says.

The couple’s semi in Plantation Drive has been on the market with estate agents Quantum for 16 months. In that time, Philippa says, the sale has fallen through twice – once just before Christmas.

The couple, who are aged 46 and 48 and have one child still living at home, are looking to downsize and move into a new-build log cabin at Wilberfoss.

They are not desperate to sell, Philippa stresses. It’s just that they cannot get on with their new life until they do. So will the change in Stamp Duty help?

“It is a real buzz,” says Philippa, a York-based jewellery professional. “Hopefully, this will be something positive that will help first-time buyers or people like ourselves that are wanting to downsize.”

The first time buyer

THE changes in Stamp Duty are excellent news, according to Damien Ferrari, a 23-year-old from Scarborough looking to buy his first home.

Damien’s wife, Melissa, a supermarket team leader, is pregnant with the couple’s second child. Their son, Valentino, is nearly three.

They live in a private rented semi on the outskirts of Scarborough, but would love to be able to afford their own home.

“The money I’m paying in rent could be going into our own property,” says Damien, who works part time as a bar supervisor while also studying marine biology at Hull University.

“There would be more financial security for us, and also for our children when they are older.”

Up to now, however, the couple simply have not been able to afford to buy. It is not so much the high price of houses, however, as mortgage rates which have been the problem, Damien says.

He thinks making more money available for shared equity schemes is a good idea. “That is something we would definitely consider just to get on the housing ladder.” He is particularly pleased about the change to Stamp Duty. “Every little helps. We could put the money saved towards a deposit, and it increases the range of places that we could look at.”

The shared owner

FORMER York St John University student Claire Stockwell bought a two-bed terrace a year ago with her friend and fellow teacher Laura Sutcliffe.

They decided to pool their resources because they couldn’t afford to buy a place on their own, the 27-year-old says.

The pair now pay £510 a month each on their mortgage – and Claire, who earns about £24,500, admits it can be a struggle.

“We are finding it quite hard.” So hard, in fact, that at the moment they are paying off interest only on their mortgage, not capital.

The pair paid £175,000 for their house – exactly the threshold for the new Stamp Duty exemption. It would have been great if they’d not had to pay the £1,750 tax, Claire says. “We were really worried about it. We didn’t have much money.”

The experts

The Stamp Duty changes make great headlines, says mortgage adviser Steve Broadley, of the Mortgage Advice Service, in Skeldergate, York. But he doubts it will make a difference to people’s ability to afford a home.

The real problem, he says, is not Stamp Duty or even the cost of homes: it is finding a lender prepared to offer a mortgage.

To be able to get a mortgage at a decent interest rate, Steve says, a buyer has to be able to put down a 25 per cent deposit. That is a lot of money to find.

Mortgages are available which require smaller deposits – some as little as five per cent, Steve says. But the interest rates are much higher.

Scrapping Stamp Duty for cheaper homes, and providing cash help for first-time buyers and those threatened with repossession of their homes, is all very well, Steve says – but these measures don’t tackle the heart of the problem, which is persuading lenders to lend again at reasonable rates.

The volume of new mortgages is running at about one tenth what it was a year ago. “The key thing is that we need to get the lenders coming back on board,” he says. Economic conditions have to be created which provide stability and confidence.

Estate agent Hazel Smith, of Quantum, in York, admits that when it comes to the housing market every little helps.

But she agrees with Mr Broadley that while scrapping Stamp Duty won’t hurt, the real problem buyers face is finding a mortgage.

She has had a number of deals fall through because the cost of the mortgage had risen to such an extent the buyers could no longer afford it.

Colleague Adele Barlow agrees. “I think people would buy today if they could,” she said. “But they are struggling to get the funding.”

Andrew Bowes, managing director for Persimmon Homes Yorkshire, wishes the Government had gone further to address the challenges facing the housing industry. But he welcomes the new “recovery package” and in particular the help for first-time buyers.

“First-time buyers play a crucial role in sustaining the market and the one-year Stamp Duty holiday will provide some much-needed financial relief for those who are struggling to get on to the property ladder,” Mr Bowes says.

“We are pleased the Government has ended the uncertainty over Stamp Duty reforms, however, we would have preferred a total break from Stamp Duty and the introduction of additional measures such as a Government savings initiative to help bridge the gap between their savings and the minimum deposit needed for a new home.”