With the stamp duty holiday ending, what is in store for the UK property market?.
Over the last 18 months, the UK housing market has performed more strongly than ever in spite of the Coronavirus pandemic. This was due in part thanks to a Stamp Duty Land Tax (SDLT) holiday announced by the Treasury which was introduced in June 2020.
During this holiday period, buyers were exempt from paying Stamp Duty on properties up to the value of £500,000 and could save up to £15,000 on their purchase. The scheme is now tapering off and will end entirely in September, with the savings on offer gradually declining up to that time. From 1st October 2021, the nil-rate price band for SDLT will return to properties worth £125,001 and under.
The SDLT holiday significantly boosted demand at a difficult time for the housing market, maintaining the growth we had seen in previous years. In fact, as the holiday went on, the savings in SDLT increased demand significantly and actually increased the pace of house price growth even further.
So, what does the housing market look like now we are in the final stages of the SDLT holiday, and what is the outlook over the rest of 2021?
The run-up to the end of June 2021 – when the most significant drop off in available SDLT savings occurred – saw a rush for new properties as many people tried to get their purchases over the line before that date. This led to a small decline in completions in July as there was a pause for breath. However, this appeared to have little impact on house price growth in the UK.
While it is true that new figures from Halifax showed that year-on-year house price growth fell by 1.3% in July, it must be borne in mind that this was a fall from the historically high levels caused by the bottleneck ahead of the June cut-off date for the biggest SDLT savings. The average UK house price is still 7.4% higher than it was a year ago – and this level of growth is still extremely high.
Russell Galley, Managing Director of Halifax, said: “This easing was somewhat expected, given the strength of price inflation seen last summer, as the market began its recovery from the first lockdown and with activity supported by the start of the stamp duty holiday.”
Supporting this, he notes that the number of available homes for sale has decreased and that this will spur demand further once again in coming months: “This general lack of supply should help to support prices in the near-term, as will the exceptionally low cost of borrowing and continued strong customer demand.”
It is this lack of supply that is continuing to fuel sky-high demand and will push prices upwards further throughout 2021, into 2022 and beyond.
The latest figures from Zoopla offer serious encouragement, noting that demand is currently twice as high as it typically is at this time of year, and sales agreed are 22% above the annual average from recent years. For example, demand for new properties in the London commuter belt has increased by 86% compared to the 2017-19 levels. This is likely due to the increase in hybrid working and will put a premium on new build developments near London, making this the ideal time to invest in the London commuter belt.
Simon Rubinsohn, Chief Economist at the Royal Institution of Chartered Surveyors, confirmed this, stating: “Although the tapering in stamp duty is beginning to have some impact on RICS activity indicators, the overall tone to the market remains firm with the metrics capturing price expectations showing few signs of wavering.”
With the SDLT holiday ending, this is an ideal time to invest in property and take advantage of the upcoming growth that is projected for 2021 and 2022 as demand grows.
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