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Will the Budget stamp duty cut really help first time buyers?

"As we all know, the UK is in the midst of a housing crisis, due to a lack of supply of housing, especially of the right type in the right parts of the country. The number of 25-to-34 year olds owning their own home has fallen from 59% to 38% over the past 13 years as housing supply has failed to keep pace with demand.

"The housing measures announced in the budget yesterday were a mix of measures to boost supply and an eye-catching abolition of stamp duty for lower-priced properties. Most economists, as well as the OBR, are agreed that this cut in stamp duty will be quickly reflected in higher house prices, and so will benefit existing owners of properties rather than first-time buyers. The design of the scheme also means a reintroduction of the old “slab” system of stamp duty at the £500,000 threshold and will thus distort the housing market at this point.

"In the medium term, the package of supply-side measures announced yesterday will be of more benefit to first-time buyers. However, the question remains open as to whether these will be enough to significantly boost supply. As the OBR says, 'While there has been some recovery in the pace of housing starts in recent years, it is difficult to distinguish the effect of changes in the planning system from the more general recovery in housing market activity – and housing starts remain below their pre-2008 levels.'

Professor Ben Lockwood, Dept of Economics

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