Stamp Duty - success of tax break shows why reform is...

One of the leading figures in trade body Propertymark wants stamp duty to be reformed, and claims that the success of the holiday - ending today - proves how much the tax actually holds back the market.

The holiday on stamp duty rates was introduced in July 2020 and ends today; the initial holiday meant home buyers didn't have to pay stamp duty on the first £500,000 of purchase, falling to the first £250,000 from July 1.

However, the nil-payment threshold will return to the pre-Covid level of £125,000 from tomorrow.

Demand, sales and average prices have all risen since July 2020, prompting Mark Hayward - chief policy advisor at Propertymark - to say: “When we campaigned for the introduction of a temporary Stamp Duty Land Tax holiday, we hoped it would help increase confidence and consumer spending in the housing market and play a crucial role in restarting our economy.

“It has done just that and has been a great success, creating a healthy and flowing market which has encouraged more people to buy and sell - as evidenced by our own Housing Market Reports which have seen an increase in the average number of buyers and sales agreed.

“With the holiday at an end, it is now timely to review the outdated levels at which people start paying stamp duty to reflect market demand, average house price and wage growth, given the basic, pre-Covid rates have not changed since 2014.”

Analysis from Propertymark shows that the average number of buyers per branch a month rose by more than 100 between July 2020 and August 2021.

There was an average of 445 buyers per branch during that time, which is higher than average of 340 between April 2019 and June 2020 in the 14-months before the Stamp Duty holiday.

Sales agreed per branch also shot up 41 per cent to an average of 11.3 a month during the Stamp Duty holiday between July 2020 and August 2021.

And fewer homes sold for below the asking price and more above during the Stamp Duty holiday, showing the sector turned from a buyers’ market to a sellers’ market; some 45 per cent of monthly agreed sales were less than the asking price, as opposed to 80 per cent in the 14 months prior.

More instead sold above the asking price – an average of 19 per cent during the Stamp Duty holiday as opposed to just four per cent in the months before it was introduced. At its peak, 40 per cent of sales agreed were above the asking price in June 2021.

Office for National Statistics figures also show average house prices increased in England to £271,000 (seven per cent higher) and £153,000 (nine per cent higher) in Northern Ireland in the 12 months after the Stamp Duty holiday came into force, between July 2020 and the same month this year.

ONS figures also show the number of transactions rose by a quarter during the Stamp Duty holiday compared to the previous 12 months.

In England sales rose 25.8 per cent from 1,121,180 to 1,410,970, while they rose 26.5 per cent in Northern Ireland from 29,550 to 37,400.