Yesterday marked the closure of the Government’s controversial stamp duty holiday, which has been slammed for “distorting” the market and sending house prices rocketing.
However, according to property experts, the end of the tax break may calm the market and help more first-time buyers realise their home ownership dreams.
The stamp duty holiday came into force last July, bolstering the property market and the economy in the midst of the pandemic. The tax break meant buyers paid no stamp duty on homes worth less than £500,000 and saved £15,000 above that threshold.
New data from Rightmove shows that 1.3 million buyers have benefitted from the relief but in turn this has resulted in a £16,000 rise in the asking price of a home since July last year across the country and £8,400 in London.
Knight Frank lambasted the measure. Tom Bill, head of research, said it has “distorted” and “turbo-charged the market”, causing double-digit house price growth and making the deposit needed to buy a home in London even higher.
“The end of the holiday can be viewed as positive, signalling a return to post-pandemic normality,” says Bill.
Who wins: first-time buyers or investors?
The handout encouraged buyers at all price levels to move, particularly second and third-steppers looking to upsize the family home. It also incentivised investors to purchase flats again, although they have to pay a three per cent surcharge.
“We are not expecting to see a massive drop-off in sales as the stamp duty tapers off, but we do think that it will give first-time buyers their competitive advantage back,” says analyst Lawrence Bowles of Savills.
From October 1 only first-time buyers will get stamp duty relief on property worth less than £300,000, so there will be less competition from buy-to-let investors or those buying city boltholes for the future.
Has the stamp duty holiday done more harm than good?
A recent survey from The Financial Wellbeing Forum and instalments-based credit card Tymit found that the stamp duty holiday pushed people to rush to buy a home, over-stretching themselves and leading them to make poor budgeting decisions.
More than half (56 per cent) of home buyers aged 25 to 34 said they rushed their purchase to take advantage of the window and have exceeded their moving budget. Londoners polled overshot their budget the most out of any region of the UK, by £27,000 on average.
Homes on offer
There are developers offering to pay stamp duty after today’s deadline and a three-month tapering in order to sell. Barratt Homes will extend the deadline to the end of August to all those who reserve a new home over the summer in the Walthamstow development Blackhorse Road View. Prices start from £486,000.
Galliard is offering to pay stamp duty until the end of the year at the Wimbledon Grounds scheme. Prices start from £450,000.
St Modwen will pay stamp duty on homes worth up to £500,000 until the end of September at The Dice in Uxbridge. The two-bedroom apartments cost £481,995.