MILLIONS of Brits raced to bag a home and save thousands of pounds by beating the stamp duty holiday deadline last month.
The tax-break began to taper off from July 1, which caused a last minute scramble to complete on a new home.
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Figures released by Nationwide in June showed the relief is partly to blame for a surge in house prices at the fastest pace since 2004.
Annual house price growth jumped to 13.4% in June – the strongest growth since November 2004.
Tax on the first £500,000 of a home purchase was temporarily scrapped until June 30.
The relief meant Brits could save up to £15,000 if they completed their transaction before the deadline.
What is stamp duty?
STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.
Up until July 8 2020, most house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.
This was temporarily increased to £500,000 until March 31, 2021 in the government’s mini-Budget in July 2020.
The Chancellor extended the help until September 2021 in his Spring Budget.
The holiday has now been reduced to £250,000 as of the beginning of July 2021.
The rate a buyer has to fork out varies depending on the price and type of property.
Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you’re a first-time buyer.
The usual system in England for residential properties means:
- First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
- You pay nothing if the property costs below £125,000
- You pay 2% if it is worth between £125,001 and £250,000
- You pay 5% if between £250,001 and up to £925,000
- You pay 10% if it is between £925,001 and £1.5million
- You pay 12% on anything over £1.5million
For second homes or buy to let properties:
- 3% on purchases up to 125,000
- 5% on purchases between £125,001 and £250,000
- 8% on purchases above £250,001 and £925,000
- 13% on purchases above £925,001 and £1.5 million
- 15% on purchases above £1.5 million
It meant a raft of opportunistic homebuyers flooded the market to cash in on the saving.
But Covid has meant less homes are being put up for sale, leading experts to estimate Britain could have no homes left on the market this summer.
This means a boom in demand coupled with a lack of property available to buy has caused house prices to soar.
Average prices have increased to £245,432, up from £216,403 in June 2020, according to Nationwide.
But has the market cooled down after the stamp duty holiday began to taper off last month? And will prices finally dip in 2022 after this year’s buying frenzy?
We spoke to property experts to see what will happen:
Are prices falling after the stamp duty holiday tapered off?
House prices may have reached record highs earlier this year, but experts say that prices have started to cool off now after the full stamp duty holiday came to and end in July.
Homebuyers can still benefit from reduced rates though.
Now, the tax-free threshold is set at £250,000, which is double the normal allowance until the end of September.
The stamp duty rate will then return to its normal limit at £125,000 from October 1.
Property consultant Andrews Property Group chief executive David Westgate said: “The red-hot property market has definitely cooled a little, due to the partial removal of the stamp duty holiday.”
However, he added prices are still yet to dip substantially because demand for homes is “still outstripping supply”.
Quilter mortgage expert Charlotte Nixon agreed that prices are starting to drop but said they “still remain inflated”.
She said: “With the stamp duty holiday set to completely go in a matter of weeks, this downward trend is likely to continue into the autumn and may drop even further come winter.”
Will prices drop further in 2022?
The Centre for Economics and Business Research predicts that property prices will tumble 14% by the end of this year as we enter into 2022.
Mr Westgate adds that we could see a stamp duty shake-up in the 2022 Budget in March next year – and possibly see the relief return.
“It wouldn’t surprise me if the Chancellor announced some changes to Stamp Duty in his 2022 Budget to keep house prices in check and avoid the property market overheating,” he said.
Meanwhile, homebuying platform YesHomebuyers estimates as much as £5,000 could be knocked off property price tags by next year.
Founder and managing director Matthew Cooper said: “What goes up must come down, and house prices are no different.
“They are currently so inflated through high demand and lack of supply, that it would take a miracle for them to remain this high for any extended period of time.”
New 5% deposit mortgages have been launched by leading banks including Natwest and Barclays as part of the government’s 95% mortgage scheme.
Lenders pulled almost all of these types of mortgage deals when the coronavirus crisis hit last year as they were seen as too risky.
We explain how to find the best mortgage for you, including lenders offering “no deposit” loans.
Budget 2021- Chancellor Rishi Sunak announces an extension to the stamp duty holiday extended until September
