Kwasi Kwarteng has abolished stamp duty on houses valued up to £250,000 in a bid to boost the property market.
The announcement, in the Chancellor’s mini-budget, came despite warnings from economists that it will push prices up and fuel inflation.
Mr. Kwarteng said his move – effective immediately – would remove 200,000 people from stamp duty.
The Chancellor raised the threshold below which no stamp duty is due from £125,000 to £250,000 – and from £300,000 to £425,000 for new buyers.
The levy was previously imposed at 2 per cent for houses valued between £125,000 and £250,000 – or 5 per cent for a second home – with higher rates for any value above this level.
Raising the threshold will save £2,5000 on the sale of properties valued at £250,000 or more, but less for houses valued between £125-250,000 and nothing for houses valued below £125,000.
But an additional change from £500,000 to £625,000, the maximum value of a home that first-time buyers can claim exemption, makes the package more generous for this group.
First time home buyers can expect to save up to £5,000 on a property valued between £300-400,000 and a whopping £11,250 on a £600,000 purchase.
“Home ownership is the most common way for people to own assets, giving them a share in the success of our economy and society,” Mr Kwarteng told the House of Commons in a statement released just 17 days after he entered the Treasury. .
“So to support growth, build confidence, and help families who want to own their own home, I can announce that we are cutting stamp duties.”
He told MPs: “The steps we have taken today mean that 200,000 more people will not have to pay stamp duty at all. This is a permanent reduction in stamp duty, effective today.”
But Shadow Chancellor Rachel Reeves said much of the benefit from the changes would go to landlords and people buying second homes.
“These stamp duty changes have been attempted before,” she said. “The last time the government did it, a third of the people who took advantage bought a second home, a third home, or an owner-occupied home.
“Is that really the best use of taxpayers’ money when the loans and debts are already so high?”:
And the changes were greeted with alarm by market analysts, with one developer warning they could be “the last push to see the housing price bubble burst,” leaving recent buyers in negative equity.
Joe Garner, managing director at London-based real estate developer NewPlace said:: “The introduction of a cut in stamp duty five weeks before the loan-buy assistance TAUT is likely to lead to a massive increase in last-minute transactions, followed by a massive drop after the TAUT has passed.
“It is an irresponsible, populist policy that is likely to see house prices rise further and decouple even more from income. It is likely the latest push to see the housing price bubble burst, leaving recent first-time buyers and buyers with negative equity, while speculators are barging for below-market opportunities.”
And Philip Dragoumis, owner of London-based asset manager Thera Wealth Management, asked, “How will less stamp duty help first-time buyers when mortgage affordability declines as interest rates rise?”