FIRST-TIME BUYERS AND TOP END DRIVING AN ACTIVE MARKET

Fears about a slump in the market after stamp duty rates were restored to their pre-discount levels at the end of March appear to have been wide of the mark, writes Natasha Wright.  In fact, activity levels remain very healthy – driven principally by two sectors of the market: first-time buyers and ‘top-end’ properties.

We shouldn’t be surprised by the level of demand from first-time buyers, as this is a trend which has been building for some time.  The downward drift in interest rates – we are now seeing a number of sub 4% fixed rate mortgage deals available – has brought a sense of affordability to this end of the market, as well as a measure of confidence.

Of course, this is also a sector which is affected only minimally by stamp duty rises.  Buyers purchasing their first principal residence continue to qualify for a £300,000 nil rate stamp duty band, which means that someone considering a typical first-time buyer property priced at £350,000 will only be looking at a stamp duty hit of £2,500 – not nothing, but more than likely compensated for by cheaper mortgage repayments.

As these transactions progress, it is quite likely that demand will start to grow at the next level up, as the vendors look to move to the next step on the ladder – so that is an encouraging sign for the months to come.

At the other end of the market, things are equally buoyant.  We have seen some substantial seven-figure properties come to market recently, and there is plenty of interest amongst buyers.  Although some such purchases may be mortgage-assisted, the loan-to-value is likely to be smaller than for less expensive transactions (giving buyers access to the very best mortgage deals), and a good proportion of purchases at this level do not depend on a mortgage anyway.

People spending a million or more on their home are likely to be focussed mostly on finding their dream property, and are often prepared to pay what it takes to achieve that.  So although the stamp duty bill will be substantial on this kind of transaction (someone buying a £1 million house as their principal residence will pay £43,750), this is less of a barrier than it might be for buyers on a tighter budget.

Those commentators who have focussed solely on the effect of the end of the stamp duty discount are missing an important point: the market is driven by a wide variety of considerations, of which taxation is just one. 

In the end, if you want to move, you want to move, and unless your budget is so limited that a small adjustment in one aspect of the transaction will stop you from doing so, you will do everything you can to achieve that ambition.