End of stamp duty holiday encourages first-time buyers

House sales edged up slightly during January as an increased number of first-time buyers looked to beat the stamp duty holiday, which expires on 24 March, says the latest RICS UK Housing Market survey.

First-time buyers will no longer be exempt from stamp duty on properties under £250,000 and some surveyors note this has produced an increase in activity at the lower end of the market.

Across the UK 12 per cent more surveyors reported rises rather than falls in newly agreed sales since the beginning of the year.

Respondents were optimistic about prospects in the near term, as a net balance of 19 per cent of surveyors predicted transaction levels to pick up over the next three months - the strongest reading since May 2010.

This follows news from the Council of Mortgage Lenders yesterday that the number of first-time buyers who bought properties within the price band currently exempt from stamp duty rose from 50 per cent to 53 per cent in December. The CML says this is probably because first-time buyers are beginning to rush through purchases before the concession ends.

Michael Newey, RICS housing spokesperson, commented: "With first-time buyers no longer exempt from stamp duty as of the end of March, it seems that some are looking to purchase homes before the deadline and, as a result, surveyors are relatively optimistic for the coming months.”

Many industry experts believe the stamp duty exemption should be extended beyond March. Charles Haresnape, managing director of Aldermore Residential Mortgages, said: “The cost to the government would be minor in comparison to the benefit it would offer home buyers on tight budgets.

“I believe it's incumbent on both government and lenders to do everything possible to help first-time buyers and we need to see more being done to help this important sector of the market."

House prices

The RICS survey found that house prices across much of the country continued to drop, albeit moderately, with 16 per cent more surveyors reporting price falls rather than rises in January.

London once again saw the strongest reading in terms of prices, while the West Midlands and Wales saw the biggest falls, with surveyors reporting net balance readings of -54 and -41 respectively.

Housing supply

Supply remained relatively steady during January, with seven per cent more surveyors reporting increases rather than decreases in new homes coming onto the market. While slightly down on December's figure of +11 per cent, this is the fourth consecutive positive reading for new instructions across the country.

Housing demand

Alongside this, overall new buyer demand dipped slightly in the first month of the year, demonstrating that the recent lift in activity has been driven by one-off factors, with seven per cent more respondents reporting falls rather than rises in new buyer enquiries.

Despite a relative upturn in interest from some first-time buyers prior to the end of the stamp duty holiday, surveyors report that lack of affordable mortgage finance continues to hold back the market.

Looking ahead, while a cautious optimism surrounds future transaction levels, the same cannot be said for future prices. A net balance of 15 per cent more surveyors expect prices to continue falling over the coming three months.

Newey commented: “Many problems with the market still exist and the lack of affordable mortgage finance is still preventing many from getting onto the property ladder.

"Prices are still falling across most parts of the country, but expectations for future prices have become less pessimistic."