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Rising house prices outstrip Stamp Duty savings for movers

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22/02/2021
The amount of deposit needed to buy a more expensive property eats into savings from the stamp duty holiday
Rising house prices outstrip Stamp Duty savings for movers

Homebuyers are racing to beat the stamp duty holiday deadline, but property prices have risen by much more than they will save since the tax break was introduced, costing them more to move, said Halifax.

The average house price for homemovers in the six months to June 2020 was £373,537, but this increased by £57,790 during the stamp duty holiday period to £431,327 in the six months to Dec 2020.

So, while homemovers have saved money on stamp duty, they’ve faced the challenge of even bigger deposits (on average £11,558) thanks to the increase in house prices during that time.

Regional split

Those who moved home in London have lower upfront costs of around £12,188, as the amount of deposit increased by an average £2,812 and was offset by stamp duty holiday savings of £15,000.

Those moving home in the South East, West Midlands, and South West are also better off, while homemovers in all other regions have seen the savings in stamp duty only partially offset the increase in average deposit cost.

The proportion of homemovers paying stamp duty on transactions dropped from 93% in the six months to June 2020 to 26% in the six months to December, while the threshold was temporarily raised from £125,000 to £500,000.

First-time buyer boost

There was also a significant drop in the number of first-time buyers paying stamp duty holiday – from 29% to 10% in the same period – although these are predominantly concentrated in London and the South East.

Almost four in 10 (38%) of first-time buyers in London paid stamp duty during the second half of 2020 – down from 86% before the holiday period started. Meanwhile in the South East this was down from 42% to 9%, followed by those in East Anglia and South West dropping from 18% and 15% respectively to 3% during the same period.

Andy Bickers, mortgages director at Halifax, said: “Since the summer we have seen a huge surge in mortgage applications, as people raced to make much sought after stamp duty savings.

“We know that lockdown restrictions have made it more practically challenging for those buying and selling, but the stamp duty ‘holiday’ has been one of the main drivers of continued demand for sales and purchases during the pandemic and we will wait to see if further steps are taken that could give people more time.”

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