The Stamp Duty holiday has provided a welcome return to a bustling property market, but with that now coming to an end, what exactly can we expect to happen next?
Over the past few months we’ve seen a breath-taking rise in property prices, so much so that the increase in some areas is completely wiping out the savings that would have been made from the Stamp Duty break.
Britain as a whole is seeing house prices grow at its fastest rate in 17 years, rising from May to June by 0.7%, increasing the annual rate to 13.4% and 5% since March this year.
However there have also been stumbling points during this period. First time buyers have still struggled to save for a deposit with 10% more than half the yearly wage of a first time buyer's income in the vast majority of cases, while mortgage rates are incredibly close to being at an all-time low.
We’re now in July, which means the stamp duty break is over. There was a mad rush to get sales over the line during the month of May. But what next?
No Change In The Immediate Short Term
Andrew Wishart, a property economist for Capital Economics told the Guardian recently, “There is little sign of market dynamics changing suddenly when the stamp duty threshold is reduced from £500,000 to £250,000 in July, despite the maximum possible saving dropping from £15,000 to £2,500.”
That is likely down to timing. The summer months are often peak time for moving home, with families not wishing to up sticks during term time, while those already in the process of moving will still want to get their move over the line.
Jeremy Leaf, a North London estate agent, echoed that sentiment, also telling The Guardian, “On the ground, we know that many of the buyers agreeing sales were not able to take advantage [of the tax break] so there is still plenty of life remaining in the market, even though demand has moderated after the frenzy of the previous few months.”
The Medium Term Change
It’s what happens when the summer is over where we could see change begin to happen. Lucy Powell, the Shadow Housing Secretary has already raised her concerns that the house price boom caused by the tax break is leaving people struggling to buy an affordable home.
She said, ““They’ve given a huge tax break to the housing sector without addressing the fundamental issues of affordability. As a result, the dream of homeownership is now even further out of reach for first time buyers who are now priced out of the market.”
Her point comes from the fact that changes to stamp duty tax saved £3,419 on an average home, but over the past year the average price of property has soared by £21,956. Which, regardless of politics, needs addressing given that stamp duty has now returned, adding further fees to moving home.
At present, stamp duty is in a tapering phase. Buyers still won’t have to pay the tax on any homes bought for a cost below £250,000 until the end of September, with it returning to £125,000 at the beginning of October.
Despite this, only 4% of people are scrapping their plans on buying currently, although a quarter will be looking to negotiate on the price to be able to stick to their budget.
It’s this that could be the determining factor in how the housing market is shaped from now until the end of the year and beyond. Factoring stamp duty back into the equation means the price of property needs to settle in order to ensure first time buyers, and people towards the lower end of the housing market can still afford to buy.
A number of experts are predicting this will happen. The stamp duty break was a huge benefit to the seller, but with that gone it will slowly shift towards a more neutral or buyers market.
It’s expected that the house price increase will slow and the market will become more attainable for buyers.
Buyers Hang Fire
In order for the property market to neutralise and people to get more affordable property prices, experts are suggesting that buyers hold fire until the market begins to settle.
What could start to cause problems, and see many turn to the likes of Property Rescue and our sell house fast offers is how the economy as whole reacts to the end of the pandemic.
Rates of unemployment are expected to rise with the change in furlough support and other Government Schemes winding down, which will naturally have an impact on house prices too.
By the turn of the year demand is expected to have softened dramatically, which will bring prices down and after a rather frenetic year within the industry we should start to see levels of normality as the country continues to recover from the pandemic.