28 Jul House price growth and Stamp Duty
On the whole, the Stamp Duty Holiday will probably be deemed a success. It stimulated the property market when it was most needed and has helped the economy get back on its feet after the Covid-19 pandemic. The revival of the property market has also kept many people in jobs and enabled part of the UK economy to recover. The savings which have been available have caused UK house prices to grow by an average of more than £10,000 in the past year according to some reports.
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What does it mean?
First-time buyers don’t pay any stamp duty on the first £300,000 of their purchase as long as the total property value is less than £500,000; so, they are unlikely to feel any direct impact of the end of the stamp duty holiday.
However, the sharp rise in house prices over the last 12 months could make affordability criteria more difficult for first-time buyers to achieve and might require them to have bigger deposits.
There are a number of reasons prices have increased. Most relevant for the South East is the Covid-19 pandemic and the subsequent successive lockdowns across the UK leading to people re-evaluating their living/work conditions and specifically the type of home in which they want to live.
In recent months this new demand for properties has prompted vendors to be more optimistic in pricing their homes. Combined with only a steady supply of new properties, this has gradually pushed prices up. According to the online portals annual house price growth was running at 4.7% in May compared to the 2.2% in May last year (2020).
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The sharp rise in property value in the UK has had a major impact across the UK in general terms. When it comes to the high-value end of the market the impact of the Stamp Duty Holiday is less noticeable as it is calculated based on the value of the property.
At its peak, the Stamp Duty Holiday enabled buyers to save up to £15,000 on their purchase which on lower value properties could mean the difference between having an extra bedroom/garden and not; however, on a £10m property it would have less influence in the decision-making process.
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