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Stamp duty holiday: The final stage

The property industry has been booming over the last year due to the stamp duty holiday. There was a maximum discount of £15,000 to be had up until the end of June, where stamp duty was waived on the first £500,000 of a property.

At the end of June this was reduced to £250,000, and it will return to its original level of £125,000 on the 1st October. Despite the reduction in the savings, the property market is proving resilient:

  • An estimated 1.3 million homebuyers have made Stamp Duty savings on their property purchases
  • The net balance for new buyer enquiries as of May was +32%
  • Property prices (UK average) for June have seen an 8.8% annual change, according to Halifax
  • In June, mortgage approvals climbed to 87,545 – a 827% increase from May’s 2020 figure
  • There’s a fight for the lowest mortgage rates and Nationwide released a sub 1% fixed mortgage deal for five years, the only one of its kind currently on the market (for those who can pay a 40% deposit)

Source: HalifaxThis is Money

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Effect so far

Since the stamp duty holiday announcement, the property market has become a stable investment opportunity for investors. With the demand for housing remaining strong, we are beginning to see areas of concern.

1) Increase in demand

Mortgage approvals rose to 87,545 (up 1%) in May 2021, making it the second month in a row where they have increased.

New buyer net balance rose for new enquiries by +32% whilst agreed sales also rose by +30% over the month.

We are now witnessing the largest gap since November 2013 between new buyer enquiries and new instructions, and this is due to the rising interest in property since the announcement of the stamp duty holiday. With house prices rocketing, investing in UK assets has proven a stable investment throughout the pandemic.

Source: Halifax

2) Rise in property value

Since the announcement of the stamp duty holiday, property has been of great interest for investors. With homebuyers, property investors, high-net worth individuals, companies, landlords and developers all looking to take advantage of this stamp duty reduction – property value has risen dramatically over the past 12 months.

August 2020

Average property value increased by 2.5% to £239,196

Top 3 English regions:

  • East Midlands: 3.6%
  • North West & London: 3.5%
  • South East: 2.9%

December 2020:

Increased by 8.5% to £251,500

Top 3 English regions:

  • North west: 11.2%
  • East Midlands: 10.6%
  • Yorkshire & The Humber: 10.4%

May 2021

Increased by 10% to £254,624

Top 3 English Regions:

  • North West: 15.2%
  • North East: 11.8%
  • East Midlands: 11%

London saw house prices rise in the year to May 2021 by 5.2%.

Source: UK House Price Index’s

3) Push for first time buyers

There is government scheme in place to help first-time buyers enter the competitive housing market, such as:

  • The Help to Buy Scheme (also known as an Equity Loan)
  • Shared ownership

During the pandemic, we witnessed many lenders removing high LTV mortgages from their shelves. This left it almost impossible for many first-time buyers to afford a property, considering that they were previously aiming for a 5% deposit instead of 10% – 25%. To help encourage new buyers, in the Spring Budget 2021, the government announced it would back 95% mortgages to encourage property investment with the Mortgage Guarantee Scheme.

4) Development delays

With so many developers trying to meet the strong demand for new housing, supplies are still falling short. Although they have already risen by 7% since the first quarter of the year, delays for new builds are looking to continue into the summer. Between the pandemic and Brexit, the shortages of building supplies such as timber and cement, are putting pressure on developers. The continual disruptions to works is causing worry for many builders, particularly those of small companies.  The shortages stem from the increasing demand for housing, but also to the rise in home improvement projects conducted by homeowners during the national lockdowns.

Source: Sky News

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What does this mean for the current market?

The stamp duty holiday has restored confidence in the property market and has brought an intense desire to purchase. In response to the rise in property value, Savills have amended their house price forecast to better align with the current market. The revision has lifted the previous predicted forecast of house price increases by the end of 2021, from 4% to 9%.

Source: Savills

Commonly asked questions:

What is stamp duty?

Stamp duty land tax is a taxation added on to the purchase of a property.

Is the Stamp Duty Holiday only for my home of residency?

No, the discount of the stamp duty holiday is available for any residential purchase, whether it be:

  • Purchasing a new home
  • Buying a second property
  • Adding a new buy-to-let property to your property portfolio

Can you only use it once?

No, the stamp duty holiday is available for any property purchase that completes before the 30th of September 2021.

Does it only work on 75% or less LTV mortgages?

The stamp duty holiday is not determined by your mortgage, so it is available for any financial option you may use to buy your property such as:

  • A mortgage
  • Cash (you may have to provide proof of funds)
  • Short term finance such as a bridging loan