Inflated house prices wipe out Stamp Duty savings

The UK Government introduced a Stamp Duty holiday for some home buyers during the coronavirus pandemic as a way to stimulate the housing market. By reducing the land tax collected on property purchases for first-time buyers and below a set value, it was hoped that the market would be stabilised while in-person viewings were not possible.

At the time of the announcement, there were concerns that any savings on Stamp Duty were going to be lost by hiked up house prices. Some experts warned that there would be a rush to execute property transactions swiftly before deadlines, and the demand created would then push prices up. The latest research may have confirmed these concerns.

Stamp Duty Savings Wiped Out

Recent research from MIAC Property Analytics has found that the average cost of buying a home in every region of the UK has increased. Their research was conducted by comparing the average property cost in the month before the Stamp Duty holiday was introduced (June 2020) and recent data while the Stamp Duty holiday is still in effect (April 2021).

The evidence suggests that despite savings made from not having to pay Stamp Duty, the increased costs of buying a property in today’s market has wiped out those savings. This was an initial concern of experts when the Stamp Duty holiday was first announced. Those who were not eligible for the Stamp Duty exemption may have paid significantly more than they would have before the pandemic.

The Data in Detail

Some home buyers were able to cash in on the Stamp Duty holiday and make a saving, but across the UK on the whole, any land tax savings were wiped out by inflated property prices.

Property prices increased sharpest in the North West from June 2020 to April 2021. The average Stamp Duty saving here was just over £1,800, but the average property price increased by 3.68%. That’s an increase of over £5,500 for a £150,000 home. Buyers in Yorkshire and Humber experienced similar increases with homes costing 3.26% more in April 2021.

It was a familiar eye-watering story for anyone buying in the East Midlands, Newport or Westminster. The average property price in the latter increased by just below £250,000. Thus, one unintended outcome of the scheme has added thousands of pounds to buyers’ mortgages.

Did Anyone Save from the Stamp Duty Holiday?

Despite property price inflation increasing across the board, there were some people able to take advantage of the tax break and still save some money.

An average saving of £755 was recorded in Aberdeen – and there were even savings made in London. Those choosing to buy in Fulham and Hammersmith will have experienced an average property price increase of £6,000. However, Stamp Duty savings in these areas averaged out at around £14,500, granting them an average saving of around £8,500.

July 2021