The stamp duty holiday unveiled by Chancellor Rishi Sunak in July has been credited with fuelling a mini-boom in the property market. According to recent figures released by HM Revenue and Customs, a total of 105,630 residential transactions took place in October, making it the busiest October in at least a decade. £1.9bn was raised from stamp duty in the third quarter of the year alone.
As a result, the average house price has risen by more than £15,000 since June. Latest figures from Halifax, Britain’s biggest mortgage lender, highlight the fact that the stamp duty holiday is now costing buyers more than they are saving.
A house price index issued by Halifax earlier this week indicated that the average UK house price increased from £241,604 in July – when the stamp duty holiday was introduced – to £253,243 in November. On most properties, this huge £15,000 increase far outweighs the amount buyers could save from taking advantage of the stamp duty holiday.
The potential stamp duty holiday saving on the average home is £2,650, while the maximum saving on a property valued at £500,000 or more is £15,000.
In comparison to last November, prices have risen 7.6% annually, which is the fastest rate of property inflation since June 2016. The data from Halifax suggests that valuations have soared by a hefty 6.5% since June.
David Hannah, founder and principal consultant of Cornerstone Tax, comments on these findings and discusses their implication on the UK property market overall: “The stamp duty holiday introduced by Rishi Sunak earlier this year, provided a great boost to the market, which had run stagnant due to the initial lockdown. Whilst it has enabled the industry to avoid the most catastrophic consequences, it was never a long-term solution.
Throughout other economic crises, stamp duty changes or relief have historically done very little to get the market moving again, and there is no reason why it would help this time around either. It has been and still is a poor tool for managing market behaviour. With low-deposit mortgages almost disappearing altogether, people are having to assess their options.
The government needs to do more to help get people get on the property ladder; government-backed purchase mortgage guarantees for borrowers would be a great way to reinstall confidence in the lending market. If the term of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security, help buyers, and get the market moving again.”
