House prices spurt but stamp duty drag looms
The property market has seen its strongest start to the year since 2004 with average asking prices climbing 1.6 per cent in March, according to the latest Rightmove House Price Index, issued today.
But the positive beginning could quickly come to an end as the upsurge in activity among first-time buyers disappears after the ending of the 1 per cent stamp duty holiday this week.
Miles Shipside, a director of Rightmove said: "For a first-time buyer, it's already hard enough to raise the necessary deposit and now, as well as potentially losing between £1,250 and £2,500 in stamp duty exemption, asking prices for their target property types have increased by over £5,000 in the last year as well."
However, the positive property story is echoed in a new Ability to Buy Index, published for the first time today by RBS. It reveals that first-time buyers' ability to buy improved by 1 per cent in 2011. But the average first-time buyer will still have to save for 35 months to get a 10 per cent deposit.
Last week's launch of the Government's NewBuy scheme may counteract some elements of the removal of the stamp duty exemption. But as the scheme – which offers loans of up to 95 per cent LTV – is only available for newly built homes, it will not help existing homeowners looking to buy or sell.
It also will not be of much use in London and the South-east. Londoners need to save for 45 months to be able to afford to buy, according to the RBI index. In fact London prices have continued to buck flat or downward trends in the rest of the country by hitting an all-time high. In Kensington & Chelsea, the average asking price is now £2,000,120, according to Rightmove.
But Nick Hopkinson, the director of property company PPR Estates, said comparing London prices to the rest of the country is a waste of time. "A continued shortage of home sellers, the annual new year burst of enthusiasm from agents, temporary relief from the Euro crisis and the massively distorting effect on the national house price data of Millionaires' Row in the Royal Borough of Kensington & Chelsea have combined to put a false gloss on UK house prices," he said.
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