The stamp duty holiday was introduced by the government last year in a bid to boost activity in the housing market. It’s currently being tapered before rates return to normal on 1 October.
Though experts are still waiting to see the full implications of the tapering and end of the stamp duty holiday, some first clues are emerging. Among the most noticeable is an increase in the number of new buyers and properties on the market. Here’s the lowdown.
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The stamp duty holiday: what has changed?
The stamp duty holiday came into effect in July 2020 as the country was coming out of the first lockdown. Under the scheme, buyers did not have to pay stamp duty on the first £500,000 of the purchase price of a property in England or Northern Ireland.
However, the full stamp duty holiday ended on 30 June.
Between 1 July and 30 September, there will be a transitional period. The threshold at which buyers have to pay stamp duty will drop to £250,000. On 1 October, the stamp duty threshold will go back to the standard rate of £125,000.
What’s happening now that the full stamp duty holiday has ended?
According to a report prepared by finance website This is Money, there are currently two key trends in the housing market.
1. Increase in the number of new buyers
Buyers who tried and failed to beat the stamp duty holiday deadline are currently taking a step back and rethinking. But as reported by This is Money, there are plenty of new buyers beginning their property search.
Various property agents are reporting an increased number of new registrations. At Knight Frank, for example, the number of new prospective buyers registering between 1 July and 7 July was 31% above the five-year average for the same period. The number of offers accepted at the firm increased by 59% and viewings increased by 4%.
Another estate agent, Winkworth, reported to This is Money that the number of people approaching them to buy a property was up 16% on 2019 figures.
Meanwhile, Hamptons reported an 8% increase in the number of buyers registering in June compared to June 2020. These buyers were extremely unlikely to benefit from the stamp duty holiday.
2. Increase in the number of properties for sale
More properties might be coming to the market after the stamp duty holiday as revealed by data from estate agents.
For example, Winkworth reported that its valuations of properties were up 12% on 2019 figures, and new instructions were up 15%.
Hamptons also reported a strong pipeline of homes to sell. They’ve received close to 7% more new instructions in June 2021 than in June 2020.
At Knight Frank, the number of market valuation appraisals in the first week of July was 3% above the five-year average, according to This is Money. Market appraisals usually occur when an owner wants to value their property for sale. They can therefore act as an indicator of supply.
A key reason for the increase in the number of properties, as noted by This is Money, is that two groups of sellers are once again active in the market:
- Vendors who were worried about allowing viewers into their homes due to the virus
- Vendors waiting for the stamp duty holiday race to end so they could sell without long mortgage and conveyancing delays
What effect might this have on the housing market?
Low housing supply has been one of the main causes of rising housing prices. Some analysts think the influx of new properties in the market following the expiry of the stamp duty holiday could bring back some balance and cause prices to drop.
Summer is traditionally a slow period for the housing market. However, uncertainty around the virus and travel regulations means that more people will be choosing to stay at home rather than go on holiday.
Therefore, there is the likelihood that housing demand will be sustained throughout the summer. This might encourage even more sellers to list their properties. With this, the low supply cycle that has plagued the market could be broken, according to This is Money.
That being said, there are still a lot of unknowns regarding the future. With furlough also being tapered off and coming to an end in September, many workers may be financially vulnerable.
Furthermore, the plan to reopen the country fully on 19 July is still on. If there is an increase in the number of infections after the reopening, Covid restrictions might be reintroduced. This might include another lockdown and the closure of some businesses.
These measures could have a negative impact on people’s personal finances and therefore affect the likelihood that they will be active in the housing market.
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