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Property sales plummet after stamp duty cliff edge

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Property sales plummeted in July after the stamp duty holiday was tapered and buyers' tax savings shrunk.

HM Revenue & Customs recorded 82,110 residential transactions last month, a drop of more than 61pc on the 213,120 sales in June. It came after a huge spike in sales as buyers rushed to push through deals in time to make the tax saving.

The figure was just 1.8pc higher than July 2020, when the housing market had recently reopened after the first lockdown.

HMRC attributed the huge month-on-month fall to the tapering of the stamp duty holiday at the end of June. Up until this point buyers could save a maximum of £15,000 in tax, but in July this dropped dramatically to £2,500.

The fall in sales was significantly steeper than that recorded in April this year, when transactions dropped by almost 36pc after a rush to complete ahead of the initial stamp duty deadline in March.

At the time it was one of the biggest declines ever recorded by HMRC, behind April 2020, when the housing market shut down in the first lockdown, and April 2016, when sales dropped after the three percentage point stamp duty surcharge was introduced for landlords and second-home owners.

Lawrence Bowles, of estate agency Savills, said: "Given a buyer completing on July 1 would have paid up to £12,500 more in stamp duty than one completing just a day earlier, it’s no wonder we’ve seen so many purchases brought forward."

Savills has forecast that 2021 will be a "bumper year" for property transactions, with more than 1.6 million homes forecast to sell by the end of December.

Mr Bowles added: "Analysis suggests the swing in transactions is an artefact of the tax regime change, and not an underlying shift in demand. However, our latest buyer sentiment survey reveals that there is still unmet demand from would-be-buyers for larger homes, and more outside space, which will continue to underpin transactions in the near term."

The frenzy of buyers rushing to meet the stamp duty holiday deadline drove house prices up by 13.2pc in the year to June, the fastest rate of growth since November 2004.

Anthony Codling, of property website Twindig, said the latest transaction numbers represented the first of two "stamp duty holiday cliffs", with another expected when the tax break ends in its entirety in September.

"Perhaps the July cliff edge points to those wealthier home buyers being fleet of foot, suggesting this has been a holiday for the cash-rich and those higher up the housing ladder rather than those aspiring to get a foot on the ladder," he added.

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