Stamp Duty changes set to motivate first-time buyers amid rising property prices, says Halifax

Upcoming changes to stamp duty are expected to drive first-time buyers to act quickly to secure properties, according to Halifax.

As the average UK home price edges closer to the £300,000 mark, prospective buyers face both new challenges and opportunities in navigating the housing market.

Halifax reported that the average UK home ended 2024 priced at £297,166, reflecting a 3.3% increase from the start of the year. However, December saw a slight dip from the November high of £297,829.

The Nationwide Building Society similarly noted resilience in the market, estimating a 4.7% annual price increase. Nationwide’s average house price sits slightly lower, at £269,426, as it uses different criteria to calculate values.

While these figures highlight the housing market’s strength, affordability challenges persist, particularly for first-time buyers.

In April 2025, the stamp duty threshold in England and Northern Ireland will revert to pre-pandemic levels.

Buyers will start paying stamp duty on properties above £125,000, compared to the current £250,000 threshold. For first-time buyers, the tax-free limit will drop from £425,000 to £300,000, potentially adding thousands to costs in high-demand areas.

Amanda Bryden, Head of Mortgages at Halifax, emphasized the urgency this creates:

“The upcoming stamp duty changes will give first-time buyers even greater motivation to get on the housing ladder and bring their plans forward.”

Despite this potential motivation, affordability remains a significant barrier. Rising house prices, combined with the higher tax bills associated with the stamp duty changes, place additional pressure on those looking to enter the market.

Alice Haine, analyst at Bestinvest, noted the dual burden:

“First-time buyers will not only need to raise enough money for a deposit but also enough to cover the higher tax bill.”

Additionally, mortgage brokers are under tight deadlines as buyers scramble to complete purchases before the changes take effect. Those starting their property search now may find it difficult to finalize transactions in time.

Housing experts predict a surge in sales activity ahead of April, followed by a slowdown once the new stamp duty thresholds are implemented.

Meanwhile, interest rate reductions are anticipated to ease the cost of borrowing later in the year. A potential base rate cut in February 2025 could prompt lenders to lower the cost of fixed mortgage deals. However, Bank of England Governor Andrew Bailey has cautioned against making firm predictions, stating, “The world is too uncertain.”

Halifax remains optimistic, expecting modest house price growth for 2025, provided employment conditions remain stable.

While changes to stamp duty may incentivize some first-time buyers to act quickly, affordability challenges and rising costs remain formidable obstacles. Prospective buyers will need to carefully weigh their options in the face of a shifting property market landscape.