How will the stamp duty cut affect the housing market?

How will the stamp duty cut affect the housing market?

The holidays are over but the “tantalising carrot” remains – what impact will the stamp duty have on the property market?

Conveyancers around the country held their breath as Chancellor Kwasi Kwarteng made his way to the despatch box in the House of Commons to announce his mini-budget for the remainder of 2022.

It had become apparent earlier that week that stamp duty was to be the subject of further change by Number 11 Downing Street.

The Friday saw Kwarteng announce a cut to stamp duty. While conveyancers’ dread at the thought of further “holidays” has been somewhat tempered, questions nevertheless remain about what the cut might mean for the property market. Here’s what we know.

Transactions climbed 26% during the stamp duty holidays of the pandemic – could something similar happen now?

Analysis from estate agency Barrows and Forrester has suggested that, while demand will not soar to levels seen during the holidays of days gone by, the cut is still a “demand-focused initiative” which will see homebuyers come “flocking back to the market”.

Looking at the level of transactions seen during the previous stamp duty holiday and how they compared to the same 15-month period prior, across England, 923,498 homes were sold in the 15 months prior to the stamp duty holiday, an average of 61,567 per month. During the 15 months a stamp duty saving was in place, this climbed to 1,167,600 homes sold, or 77,840 per month – an increase of 26%.

“There’s no doubt [the cuts] will act as a tantalising carrot to current homebuyers, tempting them back to the market after initial signs that the pandemic property market boom was starting to ease”, said Managing Director of Barrows and Forrester, James Forrester. He added:

“We’ve already seen what a stamp duty saving can do in terms of boosting market activity and so we can expect to see more of the same, albeit at a perhaps less frantic pace as there is no expiry date on the tin, as it were.”

The extent to which that tantalising carrot is overshadowed by the ubiquituous stick of rising interest rates and declining mortgage offers remains to be seen.

The average homebuyer will see the maximum stamp duty saving of £2,500 in 68% of the UK

From now on, SDLT will only be payable on property purchases over the £250,000 price threshold, saving the average homebuyer as much as £2,500.

According to comparison site GetAgent.co.uk, the average house price exceeds that £250,000 price tag in a striking 68% of the country – meaning the average homebuyer in over two thirds of the country will pay no stamp duty.

For those who do still stand to pay stamp duty, the benefits of the latest cuts are still extensive.

A further 15% of local authorities will see homebuyers save between £1,501 and £2,499, while this saving still sits as high as £501 to £1,500 across a further 13% of the market. Just 4% of areas will see homebuyers save between just £1 to £500.

Co-founder and CEO of GetAgent.co.uk, Colby Short, commented:

“The latest cut is a saving that is sure to be welcomed by households who are currently struggling with the toughest financial landscape we’ve seen in some time.

So while many across the industry remain sceptical or even underwhelmed by this latest move from the government, it will certainly help rejuvenate a market that was running a little low on steam following such a prolonged period of boom.”

Homebuyers’ total savings could exceed £1 billion

Estate agency Benham and Reeves analysed sold price data for the 574,091 homes sold over the last year, calculating the level of stamp duty that was owed, versus the amount that would have been owed under the new guidelines.

They found that the 574,091 homebuyers to have completed on a property purchase across England in the last year paid stamp duty to the tune of £5.839bn.

However, had they benefited from the stamp duty cut announced last week, the total stamp duty payable would have been £4.810bn. That’s a potential saving of almost £1.029bn per year for homebuyers across England.

Director of Benham and Reeves, Marc von Grundherr, commented:

“Any saving will be warmly welcomed for those looking to climb the property ladder, particularly in the current economic climate and, collectively, the nation’s homebuyers stand to save a significant sum as a result of the latest stamp duty changes.

But today’s cut is fairly insignificant in the grand scheme of things and will do little to help homebuyers overcome the huge initial hurdle of saving that all important mortgage deposit.

In fact, it’s fair to say that it will only add to the problem by fuelling demand and pushing house prices higher, while the government maintains a head in the sand approach to housing delivery.”

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Jamie Lennox, Editor, Today's Conveyancer

Editor of Today's Conveyancer, Today's Wills and Probate, and Today's Family Lawyer Contact LinkedIn Twitter Email

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