- Housing transactions declined by 52% between September and October, says HMRC
- The year-on-year decline was 28%, with 77,000 transactions completed
- Home buyers pay £6.4 billion less stamp duty during ‘holiday’
- However, the price of a house increased by £28,000 in the same period.
Home sales in the UK fell by more than half in October as the stamp duty holiday, which has driven the market since the start of the pandemic.
According to HMRC data, there were around 77,000 transactions in the UK last month, a 52 per cent drop compared to September. It also represents a decline of 28 per cent on a seasonally adjusted basis as compared to October 2020.
HMRC put it on the part of home buyers to ‘go ahead’ – in other words, insist on purchases before September 30 to meet the stamp duty holiday deadline.
Home sales decline after stamp duty holiday ends in October
The tax break was introduced by Chancellor Rishi Sunak in July 2020 to give the housing market a boost after an eight-week shutdown during the first lockdown.
Home buyers did not pay stamp duty on purchases of up to £500,000 between the end of July 2020 and June 2021, cutting bills by up to £15,000.
This was then reduced to allow buyers up to £2,500 off their bill, before going back to normal levels at the end of September.
Despite the recent drop in sales, there have been around 842,250 residential transactions across the UK during this financial year so far – the highest in the past decade.
Transactions also peaked in March, June and September this year.
Due to the boom in the market due to the tax cut, some experts have called for its complete elimination.
Property transactions also peaked in March, June and September this year
Joshua Elash, director of property lender MT Finance, said: ‘The monthly reduction in residential transaction volume is dramatic.
“The argument for reworking or abolishing stamp duty has never been louder or clearer.
‘Stamp duty is a tax holding the property market which will now benefit more from higher liquidity levels than ever before.’
Savills’ analysis showed that home buyers avoided paying £6.4bn in stamp duty during this period.
However, they also paid more for their homes, as tax breaks and other factors pushed up home prices.
According to the latest Office of National Statistics House Price Index, the average home price jumped from £28,000 in September to a record high of £270,000 – an increase of 11.8 per cent year-on-year.
Ian McKenzie, CEO of The Guild of Property Professionals, said: ‘The sharp drop in property transactions in October suggests that deforestation has gripped the property market since September.’
However, he added that home prices are likely to continue rising in the short term, even if sales have slowed.
McKenzie said, “While the number of transactions may be low, now that the stamp duty holiday is over, the fact that the demand for the property is currently far outweighed by the supply means that prices are likely to continue rising.” Is.”
‘At a time when there is often a rush to enter before the festivities begin, we should expect sales to remain stable until Christmas.’
However, some anticipate that the prices may start falling in the future.
This is partly due to the Bank of England’s threat of increasing the base rate, which would drive up the cost of a mortgage.
In response to base rate speculation, lenders have increased their mortgage interest rates in recent weeks.
Mark Harris, chief executive of mortgage broker SPF Private Clients, says: ‘The market continues to hike interest rates in December, although the Bank of England is indicating that the situation is ‘finely balanced’ with slower growth and energy supply. Squeeze, which won’t be helped by a rate hike.
‘Meanwhile, the dynamic nature of mortgage pricing has stalled a bit as lenders take stock.’
The next meeting of the Bank of England’s monetary policy committee, which will decide on such increases, is scheduled for 16 December.