By Legal Futures Associate Thames Water Property Searches
It has been an uncertain time for the property market in the wake of the government’s controversial mini budget in September. Higher mortgage rates, coupled with a cost of living crisis signal turbulent times ahead, with some experts predicting a house price crash could be on the cards.
One of the few measures from Kwasi Kwarteng’s ill-fated ‘fiscal event’ not to have been reversed is the Stamp Duty Land Tax (SDLT) cut. The new Chancellor of the Exchequer Jeremy Hunt confirmed that this would remain in place, after he took on the role in October.
The cuts to SDLT were introduced in a bid to stimulate greater activity in the housing market and boost economic growth, doubling the level at which people start paying the tax, from £125,000 to £250,000.
The policy incorporates specific measures designed to benefit first time buyers. It increases the level first-time buyers start paying stamp duty from £300,000 to £425,000, and allows them to access the relief when they buy a property costing less than £625,000 rather than the previous figure of £500,000. While the measures are set to reduce stamp duty bills for all home buyers by up to £2,500, first-time buyers are able to access up to £11,250 in relief.
So what does all this mean for the property market? Reaction to the SDLT cut has been mixed so far. While many experts predict that it will ease pressure on beleaguered home buyers in the short term, others have warned that it will lead to house price increases in the longer term.
Iain McKenzie, CEO of The Guild of Property Professionals, said: “It will be welcomed by people currently buying a house, but this will not solve the wider issue of affordability in the property market.
“As we saw during the pandemic, when you create incentives to buy, you see demand soar. As demand increases, the number of available properties falls, pushing house prices up. An increase in demand now would come at a time when the supply of housing is already low, with house prices already inflated beyond the budgets of many buyers.”
It is too early to say what impact the SDLT changes have had on the market so far but HMRC’s latest property transaction report shows that UK property sales fell by around a third in September.
According to HMRC, transactions fell by 37% year-on-year in September to 103,930. However, this is believed to reflect the fact that last September saw the winding down of the pandemic stamp duty holiday with buyers rushing to complete transactions before it ended. Compared to 2019 when market conditions were more normal and 99,570 transactions were completed, activity for this year was 3.9% higher.
Stephen Ward, director of Strategy at the Council for Licensed Conveyancers, predicted the impact of the latest stamp duty holiday would be less dramatic. He said: “We don’t expect there to be a spike in activity like the one we saw with the pandemic SDLT holidays, but the same advice applies: Firms should always be careful to ensure that they manage workloads to maintain the highest standards of service and advice to clients.”
