property investment

By all accounts the stamp duty holiday for properties up to £500,000 has been a pretty successful exercise in providing a bit of a stimulus to the UK property market, with prices on the rise and property sales boosted. Nationwide recently revealed rapid house price rises over a second month. After a 2% boost in August, September showed a more modest 0.9% increase. The year-on-year growth rate has set a new record for average house prices, reflecting a rise to 5%. Since the property market re-opened after lockdown in May, everyone has reported growth over and above the expected, with the stamp duty holiday assumed to have been the main driver.

Market Boost

Of course, there is no double blind test to all this and speculating whether sales would have risen at all without the stamp duty holiday is tricky. Alongside the boost to the market there has been a trend of people moving away from the city, seeking more outdoor space, be it in the countryside or in coastal locations. This is clearly a reaction to the pandemic and the lockdowns that have come with it, so that in itself could have played a significant role in the property market moving again. In addition, of course, with lockdown came frustration in the property market and reopening things in May was bound to trigger a response and the release of capital. Couple all of this with the fact that the property market is still bouncing back after a period of stagnation caused by uncertainty surrounding leaving the EU and the general election and it is rather difficult to calculate the extent of the role that the stamp duty holiday has played.

Impact on house prices

It’s possible that when the stamp duty holiday ends (unless it is extended) we will find out just how significant these other factors have been. The stamp duty holiday is due to end on March 31st, 2021, but already some are calling for an extension, worrying about the impact that ending it will have on the market. This is because it is entirely plausible that a great portion of the demand for properties is from new buyers who have expedited their plans to get on the property ladder to take advantage of the lack of stamp duty. Of course, no property market boom can go on forever and there will be an inevitable steadying of the curve with or without a stamp duty holiday. The worry is that come March 31st the pool of first time buyers who can afford to take the leap without this extra help will shrink. With Covid-19 cases rapidly increasing and the second lockdown, coupled with disruption caused by the Brexit transition in January 2021 could bring tougher times. Forecasters are united in their stance that now is a good time to sell, if your property falls into that sub £500,000 price bracket and that while the end of the stamp duty holiday will probably not impact on house prices in the short term, next year’s second quarter could see movement – the extent of which is likely to be dictated by external factors like Covid-related unemployment and Brexit. 

You can also see our other article which shows how much Stamp Duty you would need to pay. 

 

 

 

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