Stamp duty payments soar 90% despite tax holiday
The amount of tax paid by people buying a new home has nearly doubled compared to last year, despite more than half of buyers benefitting from the stamp duty holiday.
People buying a home in England and Northern Ireland paid a total of £2.06bn in stamp duty in the 3 months to the end of June, up 90% on the same period of 2020.
The jump in payments came despite the impact of the stamp duty holiday, which ended on 30 June 2021, during which the tax was not charged on homes costing up to £500,000.
Only 37% of buyers in the 3 months to the end of June 2021 were liable for stamp duty, according to HM Revenue & Customs.
By contrast, 64% of buyers were liable for the tax in the same period of 2020 (before the holiday was introduced), resulting in a payment of £1.9bn in tax duty - almost half what was paid by a smaller percentage of buyers in 2021.
Why is this happening?
The steep increase in the amount of stamp duty being paid has been driven by soaring property transactions, as people took advantage of the threshold at which stamp duty kicked in being raised to £500,000.
There was a 175% jump in the number of homes changing hands during the 3 months to the end of June, as people rushed to complete their purchase before the full stamp duty holiday ended, according to HMRC.
It also led to a significant rise in the number of people buying homes costing more than £500,000, as they were still able to make significant stamp duty savings, despite being charged the tax at a rate of 5% on the portion of their purchase costing between £500,001 and £925,000,10% on the portion between £925,001 and £1.5m, and 12% on the portion above £1.5m.
A total of 59,600 properties were bought for more than £500,000 in the 3 months to June 2021, compared with just 13,000 a year earlier, with these higher rates of stamp duty making a significant contribution to the total amount of the tax paid.
A further £485m was paid by people purchasing a second home or buy-to-let property, as the 3% surcharge on these homes was not covered by the stamp duty holiday.
At the same time, a new 2% stamp duty surcharge was introduced for overseas buyers purchasing a property in England or Northern Ireland on 1 April, which raised £19m.
What could this mean for you?
While the full stamp duty holiday on homes up to £500,000 has ended, you still have time to take advantage of the tapered stamp duty holiday.
If you can complete the purchase of your property by 30 September 2021, you will not have to pay stamp duty on the first £250,000 of the purchase.
Once the conveyancing process starts, be sure to respond to any questions or requests for documents from your solicitor as soon as possible to give yourself the best chance of completing on time.
And remember, if you are a first-time buyer, you do not have to pay stamp duty on the first £300,000 of your purchase, as long as your home costs less than £500,000.
What’s the background?
Not only did the stamp duty holiday lead to a sharp increase in the number of homes being sold, but the mismatch between supply and demand also led to strong house price growth.
As a result, an estimated 1.8m properties have been pushed into a higher stamp duty band, according to our research.
An estimated 940,000 properties have moved into the 5% stamp duty band, while 130,000 have moved into the 10% band.
The change will cost buyers purchasing a home in the 5% band an additional £725 on average once the tapered stamp duty holiday ends, while those purchasing a home in the 10% band can expect to pay £6,100 more.
Whose house price have you snooped on?
From family and friends, to colleagues and even ex-partners, we reveal whose house prices Brits secretly look up – and how you can track down yours.
Keen to find out what your boss forked out for their sprawling house? Or fancy checking out the price tag of your ex-partner’s shiny new pad?
If so, you’re in good company. Nearly 6 out of 10 Brits admit to secretly looking up how much someone they know has paid for their home.
Yes, a whopping 59% of people we surveyed have snooped on the property price of a friend, relative, colleague or even potential partner.
But only 19% of people think it is acceptable to ask someone what they paid for their home. And 65% say they would never admit to the owner that they had looked up the value of their property.
How did people react after checking out someone else's house price?
A third of Brits admitted they had continued dating someone they otherwise would not have after finding out how much their home was worth.
And a further 50% said it 'encouraged' them to keep seeing someone.
But 24% of people dumped someone after viewing their home online.
Putting romance aside, 11% of Brits confessed they felt jealous after finding out how much someone they knew paid for their home.
But 10% said they respected someone more and 9% said they liked them better after looking up their house price online.
Why are Brits nosy about house prices?
The main reason people looked up someone else’s house price was to get a better idea of what their own property was worth, with 23% of the 2,000 people we surveyed citing this.
Fancy finding out what your home could be worth? Use My Home to get an instant estimated value of your property and discover how much you could have made on it.
Around 18% of people who checked out the sale price of someone else’s property said they did so to find out what their home looked like on the inside, while 12% were motivated by nostalgia and wanted to see pictures of their previous home.
Some people were motivated by improving their own property, with 10% wanting to see what different layouts or extensions would be feasible for their home, and 9% claim they were looking for interior design inspiration.
Meanwhile, 8% of those who had looked up sale prices said they wanted to gauge if it was a good time to put their home on the market.
What could it mean for you?
Tom Parker, consumer spokesperson, said: “Buttoned up Britons love talking about house prices – but for most, asking someone straight-up what they paid for their home is still considered a taboo.
“But how much a house sold for is publicly available information and is easy to source online. Whether it’s your boss, a friend or even a potential partner, it’s clear we want to know more about the homes they live in and will often treat them differently as a result.”
Key takeaways
- A whopping 59% of Brits admit to checking out how much someone they know has paid for their home.
- People are most likely to find out what their neighbours, friends and family have forked out for their home. But 3% have looked up the price of their boss’ pad.
- Nearly a third have continued to date someone they wouldn’t have otherwise after viewing their home online, while a quarter have dumped someone as a result of it.
- The main reason people found out the value of someone else’s home was to get a better idea of what their own property was worth.
Demand for houses doubles as buyers search for more space
Whether you’re a first-time buyer or a homeowner looking to move up the housing ladder, here’s how the surge in popularity for houses could impact you.
In search of a spacious new home? You’re not the only one. Demand for houses has more than doubled as buyers search for more space in the wake of successive lockdowns.
Family houses are the most sought-after type of property, with the number of buyers looking to snap one up soaring by a whopping 114% compared with levels typically seen at this time of year between 2017 and 2019.
But while demand for all types of houses, from terraced to detached, has more than doubled, the number of buyers looking to purchase a flat has risen by only 34%, according to our latest House Price Index report.
This has led to the average cost of a house jumping by 7.3% during the past year, while the typical price of a flat has edged ahead by just 1.4%.
In fact, price growth for houses has outstripped flats across all regions of the country
But the greatest disparity has been seen in Wales, where the cost of a house has risen by 10.2% year-on-year, while the price of a flat has edged up by just 0.9%.
Why is this happening?
On the one hand, demand for houses has been stoked by the stamp duty holiday, with bigger savings on offer for larger properties (typically houses).
But it also reflects a surge in buyer interest for more space, with successive lockdowns driving people to reassess their homes and lifestyles.
At the same time, the trend for working from home has prompted people to leave city centres in favour of more rural locations, which are more likely to consist of houses rather than flats.
What could it mean for you?
First-time buyers
It could be good news if you’re a first-time buyer purchasing a flat rather than a house. The cost of flats has risen much more slowly than property values across the wider housing market during the past year.
It's worth remembering that there's significant variation across the regions though. Price growth for flats is down 0.5% in London during the past 12 months, while it's up 5.2% in Scotland.
If you're a first-time buyer eyeing a house, be prepared to face stiff competition. However, with no property to sell, you have an advantage over buyers in a property chain.
And remember that there are schemes available to help make buying your first home more affordable, such as first-time buyer stamp duty relief and Help to Buy.
Home-movers
Soaring demand for houses means that if you are planning to sell a house, you could be in a good position to secure a quick sale.
You are likely to have seen it’s value rise during the past year too. Price growth for houses has been particularly strong in Wales and the north west, where it has jumped by 10.2% and 8.8% year-on-year respectively. It’s been weakest in London, where it has increased by 5.6%.
But if you are selling a flat, you may find the gap between the value of your current home and the house you want to purchase has widened in recent months.
Head of research, explained: “There is a continued drumbeat of demand for more space among buyers, both inside and outside, funnelling demand towards houses, resulting in stronger price growth for these properties. Sellers will need to consider this when it comes to pricing expectations.”
Regardless of the type of property you are selling, if you are looking to purchase a house, you are likely to face stiff competition from other buyers.
So it's important to do your homework and be prepared to move quickly when you find something you like.
Key takeaways
- Interest in houses for sale has more than doubled as the pandemic drives buyers to search for more space.
- The number of people looking to snap up a family house has soared by 114% compared with levels typically seen at this time of year between 2017 and 2019.
- The average cost of a house has jumped by 7.3% during the past year, while the typical price of a flat has edged ahead by just 1.4%.
What’s the outlook?
While buyer demand for all property types has eased slightly, it remains up 80% compared with typical levels for this time of year.
But these high levels of demand are not being matched by the volume of homes on the market. And this means that buyer competition for houses is set to remain intense.
According to our research, house price growth for all property types is expected to hit 6% in the coming months.
But as the stamp duty holiday ends and economic conditions become more challenging, it’s set to fall back to between 4% and 5% by the end of the year.