December 2014 saw stamp duty on property purchases completely reformed by the Government. The old system prior to the change considered stamp duty as a ‘slab tax’ which meant that higher rates were incremented and applied to the whole property purchase price.
During this period, former Chancellor George Osbourne stated that around 98% of purchases across England and Wales would pay significantly less after a stamp duty reform. Changes to stamp duty ensured that people who buy homes for under £937,000 would pay less tax compared to the old system. In April 2016, a 3% stamp duty surcharge was applied to purchases of buy to let properties and those purchasing a second home.
Since December 2014, stamp duty has become ‘progressive’ and rate increases are applied between stamp duty thresholds only. This way, stamp duty increases are no longer applied to the whole overall purchase price. Due to the newly reformed stamp duty system, the progressive nature saw it often closely compared to how income tax works.
The levels of stamp duty for buy to let and second homes has also experienced a shakeup. Changes were announced by the chancellor in his 2015 autumn statement which later came into effect in April 2016. For purchases made in addition to a main residence saw a substantial increase in their rate of stamp duty. A 3% surcharge was applied to buy to let and second home purchases with a new lower threshold of £40,000.
Furthermore, stamp duty for first time buyers changed within immediate effect since the Autumn Budget on November 22nd, 2017. The results were that for first time buyers stamp duty would be completely abolished.
Decrease in First Time Buyers
The National Association of Estate Agents Propertymark have found that first time buyers looking for homes have reached a three year low in August this year as figures dropped below 20%. Statistics also indicated that the number of properties for sale has decreased for the first time since April 2018. Due to escalating house prices, purchasing a home has become increasingly more unachievable as saving for a deposit proves an almost impossible task, particularly for those renting whilst trying to save for a house deposit.
UK rents are predicted to climb by 15% over the next five years, increasing the gap between those who rent and those that can afford to buy. For most non-home owning Brits, putting money aside for a deposit is not a priority, despite renting costing an average of 2% more a month than a mortgage. This means that buy to let property investments like those offered by RW Invest are proving a good investment, with increased rental demand.
The number of first time buyers has dropped significantly over time. During the period of 2005 to 2016 there were 21,000 fewer first time buyers, however from 1995-2006, there was a decrease of 247,000 buyers. Evidently, home ownership levels have fallen dramatically over the years and due to soaring prices leaving properties hard to obtain, this trend looks set to continue.
Not only have the numbers in first time buyers changed significantly dropped over the last 20 years, the age of homeowners has witnessed a complete shift. In 1981, nearly one in three 16-24-year olds owned their own home, slowly slipping to one in 10 in 2016, causing the proportion of young renters increasing by 14% since 1996.
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