Effects of stamp duty holiday end may be minimal
The stamp duty holiday has ended for some buyers but the effect on the market could be minimal. Sharon Dale reports.
Price indices, updates on activity and forecasts this week reveal that the turbo-charged housing market in Yorkshire looks set to remain buoyant, even though the stamp duty holiday has now ended for some.
The tax break, announced by chancellor Rishi Sunak a year ago, was rocket fuel to what became a remarkably buoyant housing market.
In July last year, the stamp duty threshold in England and Northern Ireland was raised from £125,000 to £500,000, which meant that home buyers paid no stamp duty on the first half a million pounds of the purchase price as long as completion of the deal was by June 30, 2021.
On Thursday this week, the stamp duty threshold fell to £250,000 and will return to its pre-pandemic level of £125,000 at the end of September, 2021.
First–time buyers get special treatment in an effort to help those struggling to get onto the property ladder. From July 1 until the end of September, they can purchase homes costing up to £300,000 without paying stamp duty. On the portion between £300,001 and £500,000 the tax is 5%. You are eligible if you and anyone else you are buying with are first-time buyers.
First time buyers purchasing a property over £500,000, which is not the norm here in Yorkshire, pay the full amount of stamp duty.
From October 1, 2021, stamp duty rates for all will be £0£125,000 = 0%; £125,001-£250,000 = 2%; £250,001-£925,000 = 5%; £925,000-£1,500,000 = 10%; £1,500,000+ = 12%
While the tax break has boosted the property market, its loss won’t be catastrophic, according to estate agents, who are exhausted after an unprecedented period of frenzied home buying and selling.
Fergus Purtill, area manager at Beadnall Copley estate agents, says: “Whilst the mid to high end of the housing market could potentially cool we fully expect the market around the £250,000 mark to continue to be buoyant.”
The desire to move for a change of lifestyle is the main driving force for buyers who crave more space, gardens and rural settings.
While the end of the furlough scheme in September is a concern, house prices are unlikely to fall in the short term as the supply of homes for sale is not keeping pace with demand plus mortgage rates are almost at an all-time low.
Zoopla reports that the total stock of homes for sale remains constrained, down 24% compared to June last year. This has helped push the average UK house price up by about £10,000, taking it to £229,300.
The property portal says that while buyer demand has moderated as the stamp duty tax break has been reduced, it remains elevated compared to normal market conditions
Its latest update shows that annual house price growth now stands at 4.7%, up from 2.2% a year ago, with Yorkshire and the Humber recording the second highest rise in England and Wales.
Our region saw an average house price increase of 6.2% between May 2020 and May 2021, while Wales topped the table with a hike of 7.1 per cent. London had the lowest rise with 2.2% and the South East registered 3.6%.
The Zoopla cities index reveals that house prices in Liverpool have had the greatest growth with a 7.9% annual rise, Manchester is close behind with a 7.2% and Sheffield has seen the third greatest increase with 6.6 %. Leeds is sixth in the table with 5.9 % increase.
The number crunching shows that average house prices in the UK have risen by more than £10,000 over the last year, taking the average price to £229,300.
Supply and demand issues are pushing prices up as the total stock of homes for sale remains constrained, down 24% in the year to mid-June compared to the average in 2020.
Time to sell, which measures how quickly homes are sold subject to contract after being listed, fell to 22 days in May, down from 42 days in May 2019.
Zoopla adds: “Demand may ease further as the re-opening of the economy allows people to do more and travel more widely, but at the same time, the confirmation of working practices for officebased workers will lead to more homebuyers being able to push ahead with a move.
“The total stock of homes for sale continues to run well below historical norms, and this will underpin pricing.
“We forecast that this year will be one of the busiest for the housing market since the global financial crisis - with 1.5 million residential transactions.”
Nationwide put annual house price growth over the past year at 13.4%, the highest level since November 2004.
Yorkshire is the strongest performing region in England with house prices up 13% year-onyear.
Nationwide’s chief economist Robert Gardner says the future is hard to foresee and adds that while the end of stamp duty holidays and furlough may adversely affect the property market, the motivation to move home may override any negative effect.
While the mid to high end of the market could potentially cool, we fully expect the market around the £250,000 mark to contimue tobe buoyant