June 30th 2021 marked the end of the stamp duty holiday extension in the UK. The stamp duty holiday meant buyers haven’t had to pay stamp duty on homes worth up to £500,000. The holiday was introduced in 2020, and initially, set to end in March 2021. The three-month extension to June 2021 bought buyers and sellers more time to benefit from cost savings.
As the stamp duty holiday draws to a close, how has the scheme affected the UK property market, and who has benefitted from it?
What is the new stamp duty rate from July 1st?
The government introduced the stamp duty holiday with the aim to boost the housing market after the national lockdown. The holiday would save buyers up to £15,000, a significant saving for first-time buyers especially.
From July 1st 2021, stamp duty will operate at a reduced threshold of £250,000 until September 30th, meaning homebuyers will have to pay stamp duty on properties over £250,000, before returning to the normal rate of £125,000 from October 1st.
With rates changing so often, the government’s handy Stamp Duty Land Tax Calculator can help you find out how much stamp duty you would need to pay on your property.
Who benefitted from the stamp duty holiday?
According to Rightmove, 1.3 million buyers have benefitted from the stamp duty relief scheme! Due to such high demand for properties to benefit from cost savings house prices have naturally increased. There’s been a £16,000 increase in the asking price of homes since July 2020 across England, and £8,400 specifically in London.
The rush to buy property in time to benefit from the scheme led to buyers at all price levels wanting to move. This caused sales to be agreed faster than those already in the pipeline are being completed. Separate figures from Rightmove show that there are now 704,000 homes in the process of being sold in Great Britain – the highest in the last decade!
While the stamp duty holiday contributed to the surge in the property market, it wasn’t the sole reason for the increase in sales. In recent research from Rightmove, only 4% of buyers asked who were expecting to benefit from the stamp duty holiday, would abandon their plans to buy a property if they missed the June or September deadline.
The biggest motivators are restrictions easing, the 5% mortgage scheme, relocation as a result of the pandemic and working from home, as well as the stamp duty extension. These factors have all combined to create the busiest property market and backlog seen in the past 10 years.
Will sales drop off after the stamp duty holiday ends?
It’s safe to say that the government’s scheme did what it was supposed to do! The stamp duty holiday caused a surge in homeowners selling their properties and homebuyers rushing to buy properties to benefit from the cost savings, which gave the market a much-needed boost.
Although the £500,000 threshold has ended, those buying houses costing under £250,000 won’t have to pay stamp duty until the rate returns to normal in October. First-time buyers from October 1st will get stamp duty relief on properties worth less than £300,000. This will help to give first-time buyers an advantage on the market over movers.
As we mentioned before, despite the stamp duty holiday ending, other market drivers still remain which will contribute to the exceptionally busy property market. Due to the huge backlog of sales in the pipeline, many buyers won’t have made the June deadline and may struggle to reach the September deadline.
These buyers will still go ahead with their plans, meaning the property market won’t see a sudden drop as some people predicted. 220,000 of the 704,000 sales going through the pipeline between July last year and February this year are yet to be completed!
This means that the end of the scheme may help to relieve some of the pressures market professionals are facing. As the stamp duty holiday tapers out, the market can catch up on the backlog in the sales pipeline which will help to level out the market and balance inflation of house prices.
London’s Surveyors & Valuers has a team of dedicated residential surveyors and valuers who can support your buying process. We can provide bespoke mortgage or private valuations, building surveys and homebuyer reports to meet your needs. Contact us to discuss your residential property needs.