First-time buyers in Northern Ireland will be the biggest losers in the UK when the stamp duty holiday comes to an end tomorrow.
Over two-thirds (69%) of house purchase mortgage transactions in the province were exempt from stamp duty in the third quarter of 2009, compared with just 26.3% in the same period of 2008 before the stamp duty holiday came into force, according to new research from the Council of Mortgage Lenders (CML) released today.
That is much higher than the 17.7% of exempt transactions in Greater London and the UK average of 51%.
In September 2008 the Government temporarily raised the threshold at which homebuyers do not have to pay stamp duty to £175,000 from £125,000.
But from January 1 any house purchase between £125,000 and £250,000 will again incur a 1% tax — a minimum of £1,250.
University of Ulster housing expert Professor Alistair Adair said: “In a normal market it is not a large amount but in a situation where the availability of mortgage finance is restricted it has a greater impact.
“Many first time buyers are having to get a deposit together and then on top of that they have got to get the stamp duty.”
He added: “It is an additional cost and for some people it may put them off, you can’t deny that fact. It is putting a brake on the ability to pay at a time when Government should be trying to free up the market.”
While Northern Ireland made up only 2% of all UK home transactions in the third quarter, CML said it accounted for 3% of newly exempt transactions — a 50% increase — indicating homebuyers in the province were helped by the initiative.
Beth Robinson from estate agents Templeton Robinson said it would have helped the market if the stamp duty holiday had been extended.
“It’s very disappointing at this juncture when, towards the end of 2009, things have begun to pick up. It obviously has a particular effect on first time buyers who are already struggling with the fact that they need 100% finance,” she said.
“The market has to start at the bottom and work its way up, therefore it is all about stimulating it and making it achievable for first-time buyers.
“There’s nothing about putting the stamp duty back up again that contributes towards that. As far as I’m concerned it is a big step backwards,” she added.
Ms Robinson said her company had seen a lot of transactions in the £125,000-£175,000 bracket recently, driven by the drop in house prices from record highs.
“First-time buyers are back in a situation where what they are paying in rent they could have a mortgage for,” she said.
“However, they need a deposit, which is very difficult, and now they have to pay stamp duty as well.”
A recent University of Ulster survey found that in the third quarter of this year 60% of house transactions were for £150,000 or below and 20% under £100,000.
Treasury anticipated the concession on stamp duty would cost it £615m in lost revenue but CML estimates it has only cost the Government £356m in its first 12 months and that total foregone revenue will only be £500m due to the subdued property market.
However, properties in what the UK Government designates disadvantaged areas will continue to have special status and a stamp duty threshold of £150,000.
Ulster Bank economist Richard Ramsey said: “This measure was announced in 2001 and more than 40% of Northern Ireland falls into these areas.
“Furthermore, the majority of first-time buyers and many home movers will be able to avail of houses below £125,000-£150,000 and therefore will pay no stamp duty.”