UK Property Transactions Falter with the Withdrawal of the Stamp Duty Holiday
This week, HM Revenue & Customs figures showed a drop of 63 per cent in property transactions in comparison to the month of June. You don’t have to wear a deerstalker to know that this is related to the stamp duty holiday drawing to a close. From July 1st the stamp duty threshold decreased from £500,000 to £250,000 for buyers in England and Northern Ireland. Meaning the incentive to ‘get the deal done’ before the cut of date, was in full octane mode. In October it will revert back to the pre pandemic level of £125,000 so it won’t come as any surprise, if transactions increase again in August.
UK Housing Market influencers
Think Tank, The Resolution Foundation, took its magnifying glass to the data on Saturday, and concluded that the stamp duty holiday wasn’t responsible for the rise in UK house prices. Their reasoning? The largest increases in prices had happened in areas that least benefited from the tax cuts. Property purchased at £500,000 experienced the biggest saving relative to the house price. The top of the onward chain may have not experienced as great a saving but the impetus was there.
Many would say the ‘numbers don’t lie’ but it is the overall discount motivator that has helped bolster the market. Without doubt the pandemic need for change, the ability to work from home and low mortgage rates have contributed. But there is nothing like the illusion of a ‘concession’ to draw out even the most skinflint of us.
Why property transactions are down
Given the yo-yoing in average house prices, demonstrated by the ONS every time there is mention of the stamp duty coming to a close, please see April. It comes as no surprise transactions are down. Buyers are exhausted by the past year’s rollercoaster and need a holiday, to get over the holiday. The hope being, that on their return, the market will have plateaued.
All of us are trying to understand what the new norm will actually be. With the reopening of offices, the furlough scheme being wrapped up; public transport has started to fill up. Lines are being drawn in the sand by employers and employees. The result will dictate whether more people move or not.
Demand hasn’t gone away. Many who have moved into rented, are merely biding their time. Hoping to have benefitted from selling when prices were at their highest and buying when they have normalised. The lack of stock and low mortgage rates will keep prices at a similar level till at least next year. So for now, don’t be fixated on the data, focus on your motivations and the rest will be elementary.