Stamp Duty Savings Wiped Out by Skyrocketing Property Prices

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.”