Housing market could move closer to normality as stamp duty threshold halves

Those who missed Wednesday’s deadline could now end up paying thousands of pounds more than they had budgeted for.

An estate agent's sign (PA Wire)

The “nil rate” stamp duty threshold has been halved, in what could be the start of more normal levels of activity returning to the market.

With the threshold having now fallen from £500,000 to £250,000 in England and Northern Ireland buyers who missed Wednesday’s deadline could end up paying thousands of pounds more than they had budgeted for.

But if they drop out now, they could miss the chance to make any stamp duty savings at all.

The nil rate threshold will halve again from October 1 to £125,000 – its normal level.

According to Rightmove sales are taking around four months to go through on average, so someone starting their property search again may miss the chance to make a stamp duty saving by buying a home before October.

Some of the urgency is expected to come out of the market over coming months

Lawrence Bowles, Savills

Some buyers have agreed price cuts in order to keep the whole chain of sales moving.

The Law Society has said solicitors “have been working 24/7” to meet their clients’ wishes.

And removals firm AnyVan reported a 200% increase in demand for removals vans in June, compared with June 2020. On average, people are moving 50 miles, with a growing proportion of moves being from cities to rural areas, it said.

A spokesman for HSBC UK said: “Our teams have been working around the clock to make sure that customers buying their first home or moving house are completed without delay or drama.”

Lawrence Bowles, residential research analyst at estate agents Savills said: “Some of the urgency is expected to come out of the market over coming months”.

He added that activity in prime housing markets, which are less affected by stamp duty, remains strong.

Strong house price surges since the stamp duty holiday was first imposed last July may eclipse the potential stamp duty savings to be had.

Rightmove has calculated that nearly £16,000 has been added to the price tag on a home across Britain since the stamp duty holiday was announced in July 2020.

This is more than the potential stamp duty saving of up to £15,000 that a home buyer could have made if they had been able to complete a property purchase before Thursday.

The stamp duty holiday is not the only driving force in the market.

Some buyers had to put off plans to move in 2020 due to the coronavirus pandemic. Many are also looking to make lifestyle changes and no longer need to live as close to their workplace as employers put in place more flexible policies around home working.

Tom Bill, head of UK residential research at Knight Frank, said the stamp duty holiday may have put some buyers and sellers off – with sealed bids, over-worked conveyancing solicitors and a shortage of removals vans having been features of the heated market.

He said: “There will be a financial hit from ending the holiday but the wider point is that it signals a return to normality.”