Philip Hammond said the move would cut the tax for 95 per cent of first-time buyers – and abolish it altogether for 80 per cent of them.
“When we say we would revive the home owning dream in Britain, we meant it,” he told the Commons, to Tory cheers.
Mr Hammond added that, in London and other property hotspots, stamp duty would be axed on the first £300,000 of a purchase price up to £500,000 – a cut of up to £5,000.
The move came as he promised a wide-ranging package to boost housebuilding, setting a target of an annual 300,000 homes built by the middle of the next decade.
Higher capital funding, loans and guarantees, plus measures to boost the supply of skills, resources and land, would add up to £44bn, he said.
And the Chancellor stole another Labour policy, with a threat of what have been dubbed “use-it-or-lose-it” powers to target developers who hoard land but refuse to build.
When the policy was first pledged by Ed Miliband, before the 2015 election, some Conservatives claimed it was a Marxist measure worthy of Venezuela.
But Mr Hammond told the Commons that compulsory purchase powers would follow if backed in an “urgent review” to report back by next Spring.
“If it finds vitally needed land is being withheld from the market for commercial, rather than technical, reasons, we will intervene,” MPs were told.
There were a total of 270,000 residential planning permissions which remained unbuilt in London, the Chancellor said.
The stamp duty cut – the clear Budget “rabbit – is likely to be criticised by some for risking a further fuelling of house price inflation, until mores homes are built.
But it was welcomed as a “promising move from the Government which will no doubt be welcomed by thousands of younger buyers”, by Jeremy Duncombe, director of the Legal & General Mortgage Club.
“For too long, stamp duty has stood as just another barrier to homeownership, another cost to overcome, but with this exemption the path to owning a home has been made just that bit easier,” he said.
The review will be chaired by Oliver Letwin, the former Conservative Cabinet minister, to explore the big gap between planning permissions and housing starts.
It remit will be to “facilitate delivery of sufficient new homes, where they are most needed, to deliver a sustained improvement in affordability”.
The big developers have been accused of exercising an iron grip on the pace of housebuilding, with no commercial incentive to build faster unless prices are on the rise.
But they have rejected accusations of land-hoarding, insisting delays are often caused by a cumbersome planning system and failures by local authority planners.
Cash for house-building will include a £630m small sites fund, £2.7bn to more than double the Housing Infrastructure Fund, £400m for estate regeneration, £8bn of new financial guarantees to support private house-building and an additional £34mn to develop construction skills, Mr Hammond said.
Mr Hammond defended the Government’s housebuilding record, claiming 1.1m homes had been built since 2010, of which 350,000 were “affordable”.
But he warned that the proportion of young homeowners had plunged from 59 per cent of young people to just 38 per cent over 13 years.
“We need to do better still if we are to see affordability improved,” Mr Hammond admitted.
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