The property market shows no signs of slowing down and the stamp duty coming to an end soon doesn’t seem to be deterring people from wanting to move.
We’re in danger of sounding like a broken record when we tell you again that the property market is buoyant. We monitor the market carefully and each time we write a news update we’re telling you that prices are going up. It’s more of the same news. House prices in the UK went up by 10.9 per cent in the 12 months to May 2021 – the highest level in seven years according to Nationwide. The lender says the average house price has risen to £242,832 – an increase of £23,930 in the past year.
The figures recorded by Nationwide (which relate to its mortgage approvals) ring true with figures from the Office for National Statistics which show that prices grew 10.2 per cent in the year to March.
There are more buyers than properties. This has resulted in a surge of activity. Buyers are getting involved in bidding wars due to the short supply of properties.
Property demand
Yes, the stamp duty holiday has played a big part in keeping the market busy, but it’s not the only reason the market is faring so well. Over two-thirds of homeowners have chosen to move to bigger properties with more outdoor space. Nationwide believes the demand for bigger properties is a key reason for the thriving housing market.
Zoopla has seen property sales increase by 45 per cent compared to last year. Property experts now largely believe the market will remain healthy when the stamp duty holiday ends on 30 June.
Although buyers unable to complete on their purchases before the end of June could lose up to £12,500 of their savings, the market is so busy now that people are still keen to move even without benefiting from the saving. A spokeswoman for Hamptons Estate Agents said that talk of a ‘cliff edge’ when the stamp duty holiday ends has faded away.
While this is encouraging, especially for anyone buying later in the year, it’s also important to be aware that there are no guarantees. ‘Housing market trends can change and change pretty quickly,’ says MB Associates’ Sales Manager & Senior Mortgage Adviser Phil Leivesley. ‘Sharp increases are often followed by a correction. For some, especially those at the beginning of their home ownership journey, this is a really difficult time as the runaway train they’ve been chasing is picking up speed. Those taking a longer-term view with their move shouldn’t worry, but buyers who are speculating on getting a return in the short-term might want to pause and really consider their options.’
Stamp duty explained
Here’s a quick recap on the stamp duty situation…
• There’s a nil-band rate on stamp duty up to £500,000 until the end of June (which means you’ll pay no stamp duty on the first £500,000 of a residential property).
• From 1 July, the nil band rate will apply to the first £250,000 of a property until the end of September. In other words, you’ll pay stamp duty on the portion from £250,001 to £925,000 at a rate of five per cent (for a residential property purchase).
• From 1 October, stamp duty will revert to its normal levels before the holiday was introduced on 8 July 2020, meaning the nil band rate will be on the first £125,000 of the property price. You’ll pay no stamp duty on the first £125,000 of the property. You’ll pay two per cent stamp duty on the portion of £125,001 to £250,000, then five per cent on the portion from £250,001 up to £925,000. Again this applies to residential properties.
What if you’re a first-time buyer?
• First-time buyers will pay no stamp duty on the first £500,000 of a property if they complete by 30 June. From 1 July, they will pay no stamp duty on the first £300,000 of the property, then five per cent stamp duty on the portion from £300,001 to £500,000. If you’re buying with someone else, you both need to be first-time buyers to benefit from the saving. You can find more information on the stamp duty rates here and if you’re still not sure what you should pay, try using the government’s handy stamp duty calculator.