How did the stamp duty holiday affect residential property sales?
February 9, 2022 3 Minute Read
The stamp duty holiday was introduced in July 2020 to stimulate the housing market during the pandemic. The tax break meant buyers were exempt from stamp duty for properties below £500,000, resulting in potential savings of up to £15,000. Initially it was set to end in March 2021, but was extended to July 2021, before being phased out and withdrawn totally in September 2021.
SDLT saving (Jul 20 – Jul 21)
SDLT saving (Jul 21 – Sep 21)
There is no doubt that the holiday was key in stimulating housing demand. Overall transactions in the year to June 2021 increased by 19% compared to the previous 12 months.
However, the effect wasn’t consistent across all price bands. Average monthly sales of properties priced between £500,000 - £925,000 were 47% above the 2017-2019 monthly average. Sales in the higher £925,000 - £1.5m price band were 40% above normal levels (during the stamp duty holiday).
Figure 1: Change in average monthly transaction numbers during the stamp duty holiday
Source: CBRE Research, Land Registry
These two markets both saw the largest stamp duty saving of £15,000. They also benefitted from behavioural shifts over the pandemic. For example, the increased time spent at home led to a demand for more space inside and outside of properties. In turn this led to an increased volume of households upsizing to larger properties.
61% of the sales across these two price bands were in London or the South East. This is broadly in line with historical levels for these two regions. However, a greater proportion of these sales were in the South East during the holiday compared to the 2017-19 average. This highlights the race for space with people moving to larger homes outside of the capital.
Despite the same £15,000 tax saving also on offer on £1.5m+ properties, it was less of a driving force in activity. Average monthly transactions in this market increased by just 9% compared with the long-term average.
Properties in the cheaper price bands, below £250,000, did not benefit from the stamp duty holiday, and saw a decrease in activity. Sales in properties under £125,000 fell by 29% during the stamp duty holiday. These price points are also more likely to be smaller houses or flats which saw reduced demand during the pandemic.
Despite there being significant variance in transaction activity across different price bands, the monthly average across the entire market remained in line with the long-term average.