The stamp duty holiday in England and Northern Ireland was introduced to motivate movers and first-time buyers to take action in order to stimulate the stagnant housing market. Many thousands took full advantage of the offer, making savings of up to £15,000 on typical stamp duty liability.

Property experts are now claiming that the “knock-on effects” of the stamp duty holiday have actually left most new homeowners out of pocket. Even where the maximum £15,000 saving was leveraged, skyrocketing property prices have resulted in buyers paying more than they would have prior to the initiative’s introduction.

Commenting on behalf of Cornerstone Tax, principal consultant David Hannah highlighted the effects a sudden spike in demand has had on the housing market. According to the latest figures from Nationwide, average property prices have increased approximately 13.4% over the course of the past year.

This equates to around £22,000, significantly more than the £15,000 maximum stamp duty saving.

Consequently, many homebuyers will have found that the savings they made were nullified by the additional costs of purchasing a property.

The rush to borrow money

Others were so preoccupied with rushing home purchases that they unwittingly took out mortgages that were not the most cost-effective options available. Research suggests that up to 2.4 million movers over the past year overpaid by many thousands of pounds, having not selected the most economic products to suit their requirements.

In addition, approximately 13% were forced to borrow additional money at a cost in order to pay the fees associated with home purchases that they had not budgeted for.

Estimates now suggest that the average cost of moving house has risen to just under £9,000; combined with the enormous spike in average house prices over the past 12 months, the potential £15,000 stamp duty saving pales in comparison to the additional costs.

An inevitable bubble

Mr Hannah went on to comment on the real estate market’s current lack of stability while emphasising the importance of affordable homes as a means to solve the country’s growing housing crisis.

“The initial saving was obviously enticing; however, as the holiday and therefore the property market gathered momentum, the knock-on effects of this have resulted in an increase in costs for many buyers, rather than the huge savings initially hoped for,” he said.

“Of course, a spark in the property market has knock-on effects for the rest of the economy, providing work and growth for everyone involved in building, selling, processing, and moving people into homes.”

“However, growth must be sustainable and stable, and if we want people to really benefit from a better property market, we need more homes that are more affordable to more people—and to avoid a bubble bursting.”

June saw the highest annual property price growth since February 2007, with an incredible 10.7% rise in house prices. Take away the London growth rate figures, and that figure rises even higher to a huge 13.9%.

The East of England and the North West have seen a dip in growth rates in the month of June, but only very slightly. It’s been over a year since any area of the UK saw a fall in house prices, in spite of the pandemic and its catastrophic effect on the UK economy.

June showed the North West to be ahead of the game, with property prices showing an annual increase of 17.3%. Data shows the North West has taken the lead in the tables for the last nine months. Areas that have shown the most growth are Greater Manchester (23%), Warrington (22%), and Merseyside (19%).

Over the previous seven months, the areas that have shown the lowest annual house price growth include Greater London and the East of England, with Greater London having the lowest growth of just 1.2%. House prices in London dropped a huge 7.4% in May when compared to the previous year. Prime central London areas have seen dramatic house price drops as buyer habits changed due to the pandemic, opting for larger properties outside the city. On a month-to-month basis, June saw a rise of just 0.8%, although an improvement from March to May’s negative rates.

Director Richard Sexton stated:

“Over the last twelve months, our index has shown the average price of a home sold in England and Wales has increased by some £32,500, or 10.7%. If we exclude London from this, then the figure is a very considerable 14%. Nevertheless, even including the capital, this is the highest annual rate since February 2005. It is now fourteen months since any of the areas in our index have recorded a fall in house prices, and this is while the UK economy has been under the severest pressure it has faced in living memory.

“Any slowing of price rises in the period of March to May because of the initial expected end of the stamp duty holiday has been short-lived. This is in part because of the extension of the holiday but also because of the more general optimism in the economy, which has seen many transactions that were previously postponed come back online.

“Mid-April, even before the stamp duty holiday ends, the government has introduced further fiscal support in the shape of its 95% loan-to-value mortgage guarantee scheme. This is giving continued support and confidence to borrowers and mortgage lenders, many of whom have re-introduced their own higher LTV lending to the market. This is good for the market and for home movers.

“This fiscal support, combined with the UK’s monetary policy of historically low-interest rates, continues to make home moves more affordable and has meant buyers can take advantage of cheaper borrowing and the savings they have made in lockdown to make their home moves.”

The financial impact of the COVID-19 pandemic is likely to be felt by the people of the UK for some time. Job security has gotten steadily worse, investment performance has been turbulent, and savings rates have been slashed.

Consequently, it is of little surprise that more people are turning to financial advisers and brokers for advice. This constitutes an important opportunity for advisers to play a key role in helping their clients negotiate the economic uncertainty that lies ahead.

What all advisers must do

First, advisers need to acknowledge and appreciate the fact that their client’s circumstances will be extremely varied and dynamic from one to the next. Some may have held onto their jobs and even prospered, resulting in additional savings for potential investment purposes.

Elsewhere, many entrepreneurs and self-employed workers may have largely missed out on the government’s financial support package. In this case, they could be in a much more vulnerable position than they were prior to the pandemic.

Consequently, it is essential for advisers to dig as deep as possible to understand why a customer may have reached a decision regarding a specific financial product or strategy. All of these must fall within due diligence protocols, along with FCA guidance on how sensitive conversations should be broached.

Essential safety net

Brokers and financial advisers are interpreted by their customers as important safety nets in difficult times. They provide access to the information and insights needed for educated decisions to be made.

Now more than ever, it is essential for advisers to adopt a dynamic, thoughtful, and creative approach when providing guidance. This includes familiarising clients with products, services, and options in general they may not be aware of. For example, tools like equity release, where there are cash flow issues, methods of reducing tax obligations, and how to safeguard savings for the long term,

When providing support and suggestions, advisers also need to be mindful of how the financial position of the client could result in them needing different types of support.

With younger people, the main goal could be to mitigate as much financial disruption as possible from the COVID-19 crisis to enable them to get on the housing ladder. For clients approaching retirement, the main objective could be to ensure they get maximum value from their pension savings and continue to generate an income stream, even when they have retired.

Unprecedented events and economic uncertainty

In times of widespread economic uncertainty, advisers have the unique opportunity to simplify and improve the lives of the clients they work with. Ultimately, it is up to the customer to make all the important decisions regarding their financial position, objectives, and any action to be taken.

However, it is the responsibility of the adviser to provide them with all the information, insights, and support they need to ensure they make informed decisions.

Following a year spent primarily in lockdown, the priorities of most people have shifted radically from pre-pandemic times. Subsequently, advisers must provide an increasingly flexible, accommodating, and proactive service in order to help their customers overcome the challenges of the past year and the ones yet to come.

The UK government’s temporary stamp duty holiday was supposed to boost buyer interest and motivate more first-time buyers to get on the property ladder. With potential savings of up to £15,000 available for those who took advantage of the scheme during its run,

New figures from MIAC Property Analytics suggest that across all areas of the country, these potential savings were completely wiped out by skyrocketing house prices. In real terms, buyers were still paying significantly more for homes than would have been the case a year ago, even when factoring in the maximum £15,000 saving.

House prices in the Northwest increased rapidly between June last year and April 2021, which is up approximately 3.68% despite an average £1,849 stamp duty saving. It was a similar picture in Yorkshire and the Humber, where average houses were up around 3.26% in April this year.

Home buyers in Westminster saw the biggest average property price increase anywhere in the UK. Comparing June 2020 to April 2021, average property prices were up an astonishing £138,316, even with the stamp duty savings factored in.

The average price of a terraced home in Westminster now stands at just under £4 million.

Outside London, the biggest average property price increase was recorded in Newport, Wales, and was approximately £60,000, including the £15,000 stamp duty discount.

An unintended consequence of stamp duty savings

The goal of the stamp duty incentive was to invigorate the housing market at a difficult time. Having succeeded in doing just that, it also had a major impact on property prices as demand skyrocketed in almost all regions of the UK.

“The stamp duty holiday was an initiative designed to reboot a property market that had effectively stagnated as the pandemic and lockdown measures delayed completions and made house viewings virtually impossible,” commented Darrel Welch, managing director at MIAC Analytics.

“One of the unintended consequences of the stamp duty holiday has been a gold rush to complete before the respective deadlines, with the unprecedented demand pushing up prices in return.”

“What this data shows is that a significant amount of the stamp duty savings made over the last year has simply been added to the cost of the sale, in some cases adding tens of thousands of pounds to a mortgage.”

“This data provides a snapshot of the holiday’s impact in real-time, but it will be at least six to twelve months down the line until we can understand the true impact. If house prices snap back to pre-pandemic trends, then thousands of people could be at risk of oversized mortgages and negative equity.”

Scammers advertising other people’s homes for rent online are subsequently cheating victims out of fraudulent deposits and rental fees. This is the warning of numerous estate agents in the UK who have noticed a surge in the number of fraudulent listings appearing online.

The scam is being fuelled by the growing popularity of virtual viewings, which have become the norm for prospective tenants across the country. People are signing contracts and paying deposits without ever visiting the respective property in person.

Consequently, fake advertisements for rental properties are appearing online that are convincingly copied from reputable websites. Typically listed on online marketplaces like Gumtree, the listings appear to be genuine and are practically indistinguishable from the real thing.

Prospective tenants are taken through the process in the normal way, exchanging messages with the letting agent and viewing the property online. But when the deposit and other arrangement fees have been paid, the letting agent and listing disappear.

Some of those who were victims of the con only discovered that they had been scammed on the day they attempted to move into the property. At this point, they found that the property was either already occupied or was being advertised for sale or rent by a different agent.

Estate agents have warned that the problem is becoming more widespread all the time and have urged local and national authorities to take action.

How to avoid falling victim to online rental scams

In the meantime, experts are advising prospective tenants to be on the lookout for signs of online rental scams. The listings published by fraudsters can be surprisingly convincing, though they can be distinguished from real listings upon careful inspection.

These are the most important warning signs to be on the lookout for when browsing rental listings online:

• Free listings on sites like Gumtree should always be scrutinised and approached with caution. While there are many legitimate listings on sites like these, they are also where most fraudulent listings appear.
• Where there are multiple listings for the same property: Often with slight discrepancies from one to the next, this is a red flag of fraudulent activity.
• A clear lack of professionalism in a listing is also indicative of a potential scam. Poorly worded ads with typos and bad grammar would not be published by a professional lettings agent.
• Impossibly low prices for premium properties in desirable areas are another common warning sign. Where a listing for a property seems too good to be true, it almost certainly is.
• A reputable lettings agent will never ask for any kind of upfront payment before the property has been viewed. Where money is requested up front, always decline.
• Pushy landlords and those who are reluctant to arrange in-person viewings of a property should also be avoided at all costs, irrespective of how convincing they may be.

Thankfully, the vast majority of online rental property listings are genuine, even on free ad sites like Gumtree. Nevertheless, it is important to know how to draw distinctions between a legitimate listing and an attempt to defraud you out of your money.