New data from Skipton Group’s Home Affordability Index showed that Stamp Duty changes will worsen the affordability issues facing first-time buyers (FTBs).
From 1st April, the Stamp Duty threshold for FTBs in England will drop from £425,000 to £300,000, adding £6,250 to the cost of buying a home worth £425,000.
This change is set to increase the proportion of local authority areas where the average FTB property incurs Stamp Duty from 8.4% to 32.0%.
The report also found that by the end of 2027, the fixed Lifetime ISA house purchase limit of £450,000 will fall short of the average FTB property price in more than 10% of British local authority areas, making it harder for LISA savers to buy their first home without penalties.
Further insights revealed that almost 90% of potential FTBs across Great Britain can’t afford a first home based on their finances.
Six of the 10 least affordable areas for FTBs are in Wales, while Scotland has the most affordable areas.
In Aberdeen City, three in 10 potential buyers can afford a home, compared to just three in 100 in Ceredigion.
In addition, four in 10 potential first-time buyers spend over 45% of their income on housing costs.
Improvements in home affordability since the start of the decade mean only 7.8% of households earning under £23,400 can afford a home locally.
Stuart Haire, CEO of Skipton Group, said: “The first step onto the property ladder remains by far the hardest with almost 90% of potential first-time buyers across Great Britain being unable to afford to get on the property ladder without additional help.
“Today’s analysis shows that this chronic lack of affordability is about to get even worse.
“The upcoming Stamp Duty reforms, due on 1st April 2025, will further hurt first-time buyers and government schemes designed to help more people onto the housing ladder – such as the Lifetime ISA – risk becoming as obsolete as a fax machine if house prices continue to grow.”
Haire added: “We know the public finances are tight, but we urge the Government not to move the goalposts and exacerbate the pain already being felt by first-time buyers.
“We are calling on the government to maintain the current nil rate Stamp Duty threshold of £425,000 for people buying their first home, and to uprate this threshold in line with inflation each year.
“We also want the Government to raise the LISA threshold to a minimum of £500,000 and to reduce the 25% withdrawal penalty to 20% to ensure savers can get back what they paid in.”
Haire concluded: “Across the country we see first-time buyers doing all they can to be in the best position to afford a home of their own: working hard, saving what they can, and making use of government initiatives designed to help them into their own homes.
“Despite these endeavours, monumental barriers stand in their way – barriers that can and should be removed.”
