UK slashes property tax, with biggest cuts for first-time buyers

THE UK government is planning a series of tax cuts to stimulate the country’s slowing housing market just as rising mortgage rates make properties less affordable for new buyers.  

The threshold at which property taxes are levied will be doubled to £250,000 (S$395,875), Chancellor Kwasi Kwarteng said in his fiscal statement on Friday (Sep 23).

The stamp duty threshold for those buying their first home will rise to £425,000 from £300,000 previously, while the maximum home value eligible for that relief will increase to £625,000, Kwarteng said, adding that the changes are permanent and effective immediately.

Rocketing prices have put homeownership out of reach for millions of Britons, as pandemic-era stimulus accelerated demand and caused values to jump. Now, rising interest rates designed to combat inflation are pushing up the cost of borrowing for home-buyers, putting homeownership further out of reach. 

“The steps we’ve taken today mean 200,000 more people will be taken out of paying stamp duty altogether,” Kwarteng said in a tax-cutting mini-budget designed to spur economic growth.

The likely announcement of reductions in the tax had earlier been reported in the media, prompting broker Investec to say on Wednesday that cuts would support the housing market, but rising interest rates, the cost-of-living crisis and fears of higher unemployment would remain dominant.

“Just when you think housing demand is cooling, along comes another stamp duty cut,” Knight Frank head of UK residential research Tom Bill said in an e-mailed statement. “However, what the Chancellor is giving away, the Bank of England will more than take away.”

He added: “Many buyers will find the impact of rising mortgage rates soon eclipses the benefit of a stamp duty cut.”

The government is also planning to scrap stamp duty for developers investing in sites to build new homes in specific investment zones across the country in a bid to stimulate construction, the new chancellor said. It is also preparing to introduce a bill to simplify the planning regime and speed up the process for building new infrastructure.

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The government also plans to accelerate the sale of state-owned land in an attempt to increase housing supply, he said. 

“We are getting out of the way to get Britain building,” Kwarteng added. 

Shares in builders rose after the cuts were announced, with the UK’s housebuilders’ index up around 2 per cent. BLOOMBERG, REUTERS