Stamp Duty Holiday – Hit or Miss? And what next for the property market?

The Stamp Duty holiday window has finally drawn to a close and so marks the end of one of the most spectacularly crazy periods the UK property market has ever seen! And all this against the backdrop of a global pandemic. You couldn’t make this stuff up! 

If the Chancellor’s aim was to stimulate the housing market – it was a runaway success and some! Sales records tumbled and prices rose at the fastest rate since 2004. As a result, the revenue came pouring into the Exchequer – £7.6b in the first eight months of 2021 and £1.3b alone in July, as the frenzy to get deals over the line hit fever pitch.

Now that the dust is finally settling, it seems a good time to reflect on the last eighteen months and ask was the stamp duty holiday a triumph for home buyers and sellers or was it all really worth it? And what now for those who may feel like someone who hadn’t been out for ages, then went to a party, got swept up in the night, completely over did the booze only to wake with a huge hangover asking “oh god, what have I done” 

Buyers admit rushing their purchase and under budgeting

A recent poll would suggest quite a few are asking that question with 12 % of buyers admitting to rushing their purchase and 11% saying they had overpaid to the tune of thousands. 13% admitted to under budgeting and ending up having to borrow more money unexpectedly, which could of course become a problem if there is a spike in interest rates or a price correction in the market.

Some entrepreneurs or opportunists, depending on your viewpoint took advantage of the situation, with some solicitors charging higher fees to guarantee sales completed by the 30th June deadline and removal costs escalating astronomically!

The property market is a paradox!

The property market has been one massive paradox for some time. Prices have never been higher, but it has never been cheaper to borrow money! The stimuli of the stamp duty holiday and the pandemic creating new and different property requirements for people, from increased outside space to an extra room to work from simply created the perfect storm. On the face of it, a saving of up to £15,000 on a purchase price below £500,000 seems very attractive and substantial, however depending on which house price index you choose to believe, prices have risen between 8 and 13% in the twelve months to July 2021 and the average house price risen from £239,000 in 2020 to between £261,000 according to the Halifax or £266,000 if you prefer the Office for National Statistics. You don’t need to be Einstein to do the maths. The stamp duty saving was swallowed up in many cases by the rapid house price inflation! 

So, what next for home buyers and sellers and the housing market in general? There are various rumours and schools of thought. Many market commentators believe that after such a flurry of activity there must be a cooling off period. This doesn’t mean that there will be in an imminent crash! I don’t envisage the British publics love affair with bricks and mortar will just evaporate! And demand clearly remains high, even if the current stock levels are down significantly. 

House prices are forecast to continue rising albeit at a gentler pace between 2022 and 2024, around 3.5% signalling a return to something more sustainable. There are clearly political and social influences that could yet turn all this on its head, Brexit, the end of the furlough scheme, higher inflation which results in an interest rate hike, but the housing market has proven to be resilient whatever is thrown at it.  

Will lenders stick or twist?

Another potential issue is the increasingly cautious approach by lenders who don’t seem to know whether to stick or twist and are obviously not prepared to get their fingers burned again with indiscriminate lending and we are seeing a number of variations in opinion between what properties are selling for and what they are being valued at by surveyors. Whilst I fully appreciate the need for being responsible and diligent, there must also be a common-sense approach to lending, or the market could stall. 

So, what next? Many reformers are calling for the permanent abolishment of stamp duty; however, I don’t see this as a realistic possibility. The revenue generated for the Government is desperately needed on the back of the pandemic. One possibility is to scrap stamp duty for all first time buyers? Or maybe start the lower band that stamp duty becomes payable to £250,000 as opposed to the current starting level of £125,000, which is no longer reflective of the market in many places of around the country. 

In the meantime, the current shortage of stock is likely to keep prices up and interest high without a significant drop off, even with the re – introduction of stamp duty, although some buyers will potentially factor in the increased stamp duty when weighing up their purchase decisions and future offers.