The first Covid lockdown in 2020 caused the housing market to grind to a halt, leaving property transactions in limbo and home buyers and sellers unable to move house. But has the stamp duty holiday really helped the housing market or home movers?
The stamp duty holiday announced in July 2020 promised to boost the housing market while saving home buyers thousands of pounds.
The tax break certainly contributed to a strong surge in housing transactions but there was already pent up demand from the first lockdown, together with a shift towards home working and moving to more rural areas. Together with continued low interest rates, these factors gave the housing market a turbo charge once transactions could be resumed, but they also contributed to strong house price increases.
Whether the stamp duty holiday was responsible for the increase in house prices or not, in many cases any potential savings that would have been enjoyed from the reduction in the tax break have been outweighed by higher house prices.
This is certainly good news for people with a property to sell, but it has been estimated that home movers (people who sold a property to move to another) actually spent an average 15.5% more on their move than they would have done six months earlier.
The rise in house prices brought the average house purchase price for a home mover to £431,327 – almost £60,000 more than previously.
A home mover buying an average property would have needed an extra almost £12,000 for a 20% deposit but they would have saved the same amount in stamp duty. In total, the home mover saved just £8 on their home move than they would have spent had they moved during the first six months of 2020.
On a regional level, home movers in London and the South East of England would have saved more money than people moving home in less expensive regions of England. In some regions outside the South East home movers have even made a net loss on their move, where house prices have risen higher but savings in stamp duty have been lower than price rises.
By the time the stamp duty holiday ends, the price of a home will cost home movers in the South East an additional £40,000. Add this to around £2,000 more in stamp duty because of the house price rise and around £15,000 from the loss of the tax break, and we might have to see some fluctuation in house prices to keep home movers moving.