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Stamp duty change stokes first-time buyer activity - but will it continue?

News

Published: 19 April 2012 | Author: Bernard Clarke

Our recent data showing that the number of first-time buyers in February was 8% higher than in the preceding month was widely interpreted by commentators as a clear sign of increased market activity before the removal of a stamp duty concession targeted at this group of buyers.

Data from our regulated mortgage survey (RMS) showed that the year-on-year increase in first-time buyer activity was even more pronounced. The number of buyers was 18% higher than last February and the value of loans advanced, at £1.7 billion, was 21% higher.

Last week’s data means that each of the last three months has seen a year-on-year increase in the value of lending to first-time buyers of more than 20%, suggesting that the impending removal of the stamp duty concession may have stoked first-time buyer activity for some time. 

Overall, however, first-time buyers continue to account for broadly the same proportion of purchases overall, at 39%. The first-time buyer share of the market has remained remarkably consistent at between 37% and 39% for the last 16 months.

In the past, we have seen a pronounced spike in buyer activity in the period immediately before any increase in stamp duty, so next Monday, when we publish our market commentary and estimate of gross lending for March, the figure may reflect a continuing increase in the number of first-time buyer purchases.

The stamp duty concession, under which the threshold for tax for first-time buyers was lifted from £125,000 to £250,000, came to an end on 24 March. Our data showed that 51% of first-time buyers bought properties priced at between £125,000 and £250,000 in February, up from 49% in January.

A number of reports suggested a flurry of activity by first-time buyers hoping to complete their transactions before the deadline. What is not yet clear, however, is whether the end of the concession will lead to a falling-off in first-time buyer activity, and how much this may be offset by the government’s NewBuy scheme, available to all purchasers of newly-built property.

Our RMS data also showed a less pronounced – but still significant – year-on-year increase in home-buying activity by movers. This group took out 22,500 loans, worth £3.7 billion, an increase of 16% by volume and 19% by value on February 2011.

In total, 36,600 loans, worth £5.4 billion, were advanced in February, a year-on-year increase of 17% by number and 20% by value. However, remortgaging declined 13% by volume and 6% by value over the same period, with 25,500 loans, worth £3.3 billion, in February.