When the Chancellor announced an extension to the current stamp duty holiday, it came as a sigh of relief for not only house buyers but industry professionals including conveyancers.
A tapered end to the scheme was the government’s way of avoiding setting up the housing market to crash when the SDLT holiday abruptly ends.
However, fast-forward two months and the UK’s housing market is busier than ever.
The latest figures announced by the Bank Of England revealed that although the number of new mortgage approvals dropped from 87,000 to 83,000 in March, they remained higher than the 73,000 recorded in February 2020, the last month before the UK went into its first pandemic-induced lockdown.
What’s more, the latest UK HPI (House Price Index) reported UK house prices increased by 10.2% in the year to March 2021, up from 9.2% in February 2021. This makes the average property in the UK valued at £256,405.
In response to this further increase, the Office for National Statistics said ‘this is the highest annual growth rate the UK has seen since August 2007.’
On a non-seasonally adjusted basis, average house prices in the UK increased by 1.8% between February and March 2021, compared with an increase of 0.9% during the same period a year earlier (February and March 2020).
Barriers to homeownership
While interest rates continue to run historically low, the biggest obstacle that stands in the way of would-be homeowners is the lack of housing stock which in turn has pushed up house prices.
It’s probably fair to say that any savings made by buyers from the stamp duty holiday could potentially be negated by the fact they are paying a lot more than 12 months ago for a property. Also, not all buyers will have completed in time to receive the full discount in stamp duty before the first tapered increase in SDLT came into effect on 1 July.
However, buyers still seem unphased by all of this, as Rightmove reported in its May house price index. ‘Buyer affordability is increasingly stretched, but there’s obviously some elasticity left to stretch a bit more as many buyers are squeezing their way into higher price bands.’
What’s more, the government’s 95% mortgage guarantee scheme, which came into effect on April 19th 2021, has further bolstered the market with fresh buyers.
Phase one tapering: June 30th 2021
The industry is still undecided as to whether the first tapered increase in SDLT will cool the market or whether it’ll be when the tax returns to its pre-pandemic rates in October. There is also a question with the ending to the government’s Job Retention Scheme in September, and perhaps this economic change will have the biggest impact on buyer behaviour.
Currently, the market still appears buoyant and the latest prediction by Nationwide suggests that house prices may still continue to increase, even past the point of the winding down of stamp duty and other government support schemes.
