Is stamp duty stopping you from buying a home? These property developers will pay it for first-time buyers

THERE are obvious benefits to buying a new-build home.

You’ve got a clean blank canvas to put your own design stamp on, improved energy efficiency compared with older properties and no DIY to worry about.

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For many first-time buyers, opting for a new build is the only way to get a foot on the first rung of the property ladder, thanks to the government’s Help to Buy scheme, which will lend you a deposit so long as you are buying home from a developer.

Even with a loan for deposit, when you must cobble together the cash for stamp duty and this means many first-time buyers are priced out of the market.

“On the ground, we see first-time buyers struggling to save up for a deposit and it is so difficult to get on the ladder with stamp duty proving to be a deterrent,” said Jeremy Leaf, North London estate agent and a former RICS residential chairman.

“This has a knock-on effect on the rest of the economy as first-time buyers are the lifeblood of the market - which is why schemes such as Help to Buy were dreamt up in the first place and have proven to be so popular,” he said.

The rate of stamp duty you'll pay depends on where in the UK you're buying a property.

We see first-time buyers struggling to save up for a deposit and it is so difficult to get on the ladder with stamp duty proving to be a deterrent

Jeremy Leaf, north London estate agent and a former RICS residential chairman

England, Wales and Northern Ireland have the same rates, Scotland uses different rate bandings.

The tax is calculated on the part of the property purchase price that falls within each band.

For example, if you buy a house for £275,000, the amount you will owe is calculated as follows: 0 per cent on the first £125,000 = £0, 2 per cent on the next £125,000 = £2,500, 5 per cent on the final £25,000 = £1,250. For a total of £3,750.

Legally, the purchaser must pay the stamp duty land tax on their purchase – however, some developers will offer to cover the costs for you.

“If the Bank of Mum and Dad can’t help with a gift or loan to cover buying costs such as stamp duty, then those buying a new build must try and haggle as much as possible with the developer as many will contribute towards your stamp duty,” said Jonathan Harris, director of mortgage broker Anderson Harris.

“One of the advantages of buying a new-build home is that house builders often have units to sell and are keen to do a deal”.

Stamp duty is a challenge for first-time buyers

SOLICITOR Robert Adjetey, 32, recently took the plunge as a first-time buyer with a two-bedroom apartment for £465,000 at Barratt London’s Catford Green development.

Finding the property on a website that lists new developments offering apartments on the Help-to-Buy scheme as well as the incentive to have stamp duty paid for by the developer, played a very big role Robert's decision to opt for a new build.
“I’d had enough of moving around and renting,” said Robert, who has lived in ten different properties over the last six years.
“Stamp duty is a challenge to first time buyers, especially in London,” he added.
“It is a significant amount of money that has to be paid in cash or taken out of the bank before you can make that first purchase.”
“In my case, Barratt paid the stamp duty, which was a very significant factor for me deciding to go for that property.”

And the savings are not to be scoffed at: Redrow, for instance, will pay on selected homes, so a buyer purchasing a four-bed house in Alyesford, near Maidstone, costing £459,995, could save up to £12,999 on stamp duty alone.

While Barratt will pay up to a maximum of 4 per cent of the purchase price, but you have to ask the Sales Adviser at the development for the deal.

Developers Lanes New Homes offer packages available on certain schemes, such as legal or valuation fees, or stamp duty.

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But does it just push up the cost of house prices? Developers claim that they usually offer the perk with properties that aren't selling as well as others.

Regardless of who pays the Stamp duty it is just an additional cost which is making the market harder for buyers.

Jeremy Leaf, North London estate agent and former RICS residential chairman, says: ‘Nobody likes paying stamp duty and would rather have a discount off the property than pay the stamp duty they didn’t want to pay in the first place.

HOME RUN Single girl bought £130k flat with just £10k deposit - here's how you could do it too

If the developer didn’t offer the perk, then it could cost them the sale but stamp duty is a distortion to the market that we could all do without."

Another way to reduce costs is a cashback mortgage. The Post Office, for instance, has £750 cash back on its two-year fixed-rate mortgage which charges 2.68 per cent with no product or valuation fee for those with a 10 per cent deposit.

“Cashback mortgages are particularly useful for first-time buyers who are short of ready cash as the incentive can be used to cover some or all of the cost of expenses involved in the house-buying process, including stamp duty,” said Harris.

But bear in mind that most lenders paying a limit of £1,000 cash back, for many this won’t cover the total cost of the stamp duty, so do your sums in advance.

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