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.
Property hotspots: top areas for long-term house price growth
With UK house prices nearly tripling over the last two decades, how much could you have made on your home?
UK house prices have nearly tripled since 2001, with the value of the average home soaring by a massive £163,700.
Homeowners who purchased a home before the global financial crisis saw a dip in its value between 2008 and 2012.
But these losses have been offset by strong house price growth since 2013, according to our latest research.
Where have house prices increased the most?
Kensington & Chelsea in west London has been crowned the number one property hotspot for long-term house price growth.
Homes in the exclusive London borough have soared by nearly £740,000 in the past 20 years, making it the top-performing area for house price growth of any region since 2001.
It means that the average cost of a property in Kensington & Chelsea now stands at £1.1m, after prices rose by £380,200 since 2011 and £739,800 since 2001.
The commuter hotspots of St Albans and Elmbridge saw the strongest growth in the east of England and south east respectively, with property values climbing by more than £402,000 in both locations over the past two decades.
Trafford, an easy drive from Manchester, boasted the biggest house price rises in the north west. Meanwhile, rural areas took the top spot in other regions, such as Monmouthshire in Wales.
| Area | Region | Average house price (May 2021) | Average house price growth over 10 years (since May 2011) | Average house price growth over 20 years (since May 2011) |
|---|---|---|---|---|
| Kensington & Chelsea | London | £1.1m | £380,200 | £739,800 |
| St Albans | East of England | £624,000 | £221,900 | £402,300 |
| Elmbridge | South east | £639,500 | £220,300 | £402,200 |
| East Dorset | South west | £433,600 | £141,500 | £273,500 |
| Trafford | North west | £341,000 | £112,700 | £224,700 |
| Stratford-on-Avon | West Midlands | £338,300 | £102,500 | £206,500 |
| South Northamptonshire | East Midlands | £329,300 | £116,800 | £205,900 |
| York | Yorkshire & the Humber | £292,000 | £67,700 | £188,500 |
| Monmouthshire | Wales | £283,400 | £79,400 | £183,500 |
| Newcastle upon Tyne | North east | £164,400 | £20,300 | £99,900 |
| Scottish Borders | Scotland | £162,500 | £15,000 | £97,900 |
Research
What's happened to house prices in your area?
House prices in the south have risen the most during both the past 10 and 20 years, with southern regions occupying all of the top four spots.
Perhaps unsurprisingly, London led the way, with homes in the capital increasing in value by an average of £201,300 since 2011 and £337,400 since 2001.
To find out how house prices have changed in different areas of London over the last two decades, scroll further down our article.
At the other end of the scale, homes in Northern Ireland have seen the smallest price increases during the past 20 years, with gains of only £69,600.
And homes in the north east have increased in value the least since 2011, at an average of just £13,300.
| Region | Average house price (May 2021) | Average house price growth over 10 years (since May 2011) | Average house price growth over 20 years (since May 2001) |
|---|---|---|---|
| London | £495,400 | £201,300 | £337,400 |
| South east | £363,100 | £123,400 | £227,100 |
| East of England | £321,000 | £114,900 | £210,900 |
| South west | £284,500 | £82,800 | £180,100 |
| East Midlands | £211,500 | £65,600 | £138,500 |
| West Midlands | £207,100 | £60,700 | £130,600 |
| North west | £183,300 | £41,600 | £117,100 |
| Wales | £178,600 | £44,200 | £116,900 |
| Yorkshire & the Humber | £174,800 | £38,500 | £113,800 |
| Scotland | £158,400 | £22,200 | £93,400 |
| North east | £135,200 | £13,300 | £81,300 |
| Northern Ireland | £153,500 | £19,000 | £69,600 |
| United Kingdom | £256,100 | £73,900 | £163,700 |
Research
Why is this happening?
Since the late nineties, price growth has been fuelled by falling credit costs, which has kept mortgage payments low as prices have risen, according to Howard Bettridge, Hampton's regional director in the south east.
He explained: "Many households are also now making lower monthly mortgage payments than they were in real terms a couple of decades ago.
"This has been coupled with a house building hangover from the aftermath of the 2007 crash which has created a lack of supply, pushing prices up, while house building is only just getting back to pre-2007 levels."
On top of these longer-term trends, the last 18 months have seen price growth fuelled by white collar workers’ lockdown savings, a stamp duty holiday, and homeowners reassessing how and where they live, Bettridge added.
"Prices in London and the south east spent much of the last decade surging away from the rest of the country. But this changed around three years ago, with value growth in the north outpacing the south."
What could this mean for you?
With UK house prices nearly tripling since 2001, many homeowners have seen significant rises in the value of their property since their purchase, according to research.
You can also use My Home to track your home and other properties you're interested in. It means that you can list your home for sale when the time is right for you.
However, long-term house price growth also means that buyers face forking out larger deposits to step onto, or move up the housing ladder.
If you're in need of a helping hand, you could consider one of the government schemes aimed at assisting buyers, such as Help to Buy and Shared Ownership. And, for first-time buyers, there's stamp duty relief available beyond the current stamp duty holiday.
Which areas of London have seen the biggest house price rises?
London boroughs with the most expensive homes have seen the highest levels of house price growth.
Kensington & Chelsea took the top spot, followed by the City of London and Westminster, where property values have risen by £739,800, £570,200 and £512,200 respectively in the past 20 years.
Barking & Dagenham, which has the most affordable homes in the capital, came bottom of the table, but even here house prices have increased by an average of £242,600 since 2001.
Overall, the typical home in all but seven London boroughs has seen its price rise by at least £300,000 in the past 20 years.
| London borough | Average house price (May 2021) | Average house price growth over 10 years (since May 2011) | Average house price growth over 20 years (since May 2001) |
|---|---|---|---|
| Kensington & Chelsea | £1.1m | £380,200 | £739,800 |
| City of London | £831,300 | £294,000 | £570,200 |
| Westminster | £780,900 | £257,000 | £512,200 |
| Hammersmith & Fulham | £755,400 | £261,200 | £501,000 |
| Richmond upon Thames | £759,200 | £274,500 | £477,900 |
| Wandsworth | £646,500 | £244,600 | £435,400 |
| Camden | £636,100 | £221,900 | £424,700 |
| Barnet | £619,400 | £217,300 | £416,900 |
| Waltham Forest | £545,700 | £255,900 | £394,700 |
| Haringey | £558,700 | £224,200 | £389,400 |
| Islington | £552,500 | £214,500 | £379,500 |
| Harrow | £573,800 | £213,000 | £377,400 |
| Hackney | £527,600 | £228,000 | £368,700 |
| Brent | £541,100 | £192,100 | £365,500 |
| Lambeth | £543,400 | £205,200 | £365,400 |
| Kingston upon Thames | £563,600 | £193,100 | £353,700 |
| Southwark | £493,200 | £214,400 | £347,700 |
| Redbridge | £502,300 | £202,100 | £345,800 |
| Bromley | £523,900 | £204,500 | £337,800 |
| Ealing | £512,800 | £201,200 | £337,500 |
| Merton | £495,800 | £191,900 | £336,900 |
| Lewisham | £458,500 | £204,600 | £326,500 |
| Newham | £437,000 | £203,900 | £315,800 |
| Hillingdon | £477,700 | £182,500 | £310,500 |
| Tower Hamlets | £451,000 | £185,000 | £308,300 |
| Sutton | £471,700 | £180,700 | £304,000 |
| Hounslow | £473,800 | £170,400 | £297,300 |
| Greenwich | £415,200 | £184,800 | £295,800 |
| Enfield | £441,200 | £166,600 | £285,400 |
| Havering | £414,800 | £168,300 | £281,000 |
| Bexley | £426,000 | £167,300 | £273,800 |
| Croydon | £412,300 | £161,600 | £265,900 |
| Barking & Dagenham | £345,300 | £149,500 | £242,600 |
Research
UK house prices hit new high
Average house prices are up 30% since the market peak in 2007 as successive lockdowns prompt buyers to search for more space.
The average value of a home in the UK has reached £230,700 – 30% above the previous market peak in 2007.
House prices have been driven higher by a mismatch between the number of homes for sale and surging demand from potential buyers.
And a pandemic-led clamour for more space is making family homes particularly sought-after, with demand for this type of property more than doubling during the past year alone.
Scroll down to get more insight from our latest House Price Index report and find out what it could mean for you.
House price growth continued to gather pace in June, with property values increasing at an annual rate of 5.4%. That's more than double the growth of 2.2% seen during the previous 12 months.
Northern Ireland and Wales saw the strongest house price growth at 8.6% and 8.4% respectively, the highest rates for 16 years in both countries.
At a regional level, house price growth was at its highest in the north west and Yorkshire & the Humber.
And at a city level, Liverpool, Belfast and Manchester took the top three spots. In fact, cities in northern regions, where property remains more affordable, accounted for nine of the top 10 places with the fastest house price growth.
Meanwhile, house price growth in London has been trailing the rest of the UK for eight months, and this month was no exception.
The housing market showed no sign of slowing in June, with the number of housing sales agreed running 22% ahead of average levels in 2020.
Demand from potential buyers eased slightly, dipping by 9% in the first two weeks of July after the stamp duty holiday on the first £500,000 of property ended.
But to put this into context, buyer demand remains 80% higher compared with this time of year in the more normal housing market conditions of 2017 to 2019.
In London, demand from potential buyers has polarised. In the city's outer boroughs, where there's larger volumes of houses and properties with outside space, buyer demand is a staggering 86% higher than average levels between 2017 and 2019. In contrast, in inner London boroughs, it is only up 2%.
Meanwhile, the shortage of homes for sale across the piste continued, with a 25% fall in the number of homes on the market in the first six months of this year compared with the same time in 2020.
What could this mean for you?
First-time buyers
While buyer interest for houses has more than doubled as a result of the pandemic-led search for space, demand for flats is broadly unchanged from a year ago. So it could be a good opportunity to purchase an apartment.
That said, expect to see competition from other people taking their first step onto the property ladder, with lending to first-time buyers up 25% compared with 2020.
If you're after a helping hand, the government has a number of schemes aimed at assisting first-time buyers, including Help to Buy and the new 95% mortgage guarantee.
And remember that that there's also stamp duty relief available for first-time buyers that goes beyond the current stamp duty holiday.
Home-movers
The number of homes for sale has failed to keep pace with demand from potential buyers since January, with no sign of a rebalance expected to play out imminently.
You could be in a strong position to secure a quick sale on your existing home at a good price – particularly if you own a house that's suitable for a family.
Discover how sought-after your home could be by using our handy map tool. And use our My Home experience to get an estimate of how much your property is worth to help you plan for your next purchase.
When it comes to searching for your next property, the limited number of homes on the market means you are likely to have less choice. So register with us to receive alerts whenever a property that meets your criteria is listed for sale.
You could also face stiff competition from other potential buyers. Be sure to find out from our estate agents how to put yourself ahead of the pack, from getting your paperwork in order, to lining up your mortgage brokers and solicitors in advance.
And, if more space is high on your agenda, why not see how far your budget could stretch in different areas?
What’s the outlook?
Annual house price growth is expected to reach 6% in the coming months. It’s then expected to start easing back to between 4% and 5% towards the end of the year as the second phase of the stamp duty holiday ends and economic conditions become more challenging.
Head of research explained: "Demand is moderating from record high levels earlier in the year, but remains significantly up from typical levels, signalling that above average activity levels will continue in the coming months.
"London has a two-speed market at present, with domestic demand driving price growth in the outer boroughs, while the lack of international business and leisure travel is affecting demand in the more global real estate markets towards the centre of London.
"As COVID-19 progresses at different rates across the world, unrestricted travel may not resume for some time yet, but when it does, demand will start to pick up once more."
Is your home ‘earning’ more than you?
One in five homes has increased in value by more than the average salary in the past year alone. Is it time to check how much your home could be worth?
If you're a homeowner, you could be in for a surprise.
And that’s because one in five homes has ‘earned’ more money by simply existing as bricks and mortar than the average worker has in the past year alone.
In other words, 4.6m privately-owned homes have jumped in value by more than £30,500, the average UK salary, in the past 12 months, our latest research shows.
Want to find out what proportion of homes have increased in value by more than the average salary in your area? Check out our handy tool.
What could this mean for you?
If you are thinking of moving, you may be surprised by how much your home is now worth, particularly if you want to trade up the property ladder.
“I’ve worked out that the amount we earned on our apartment is close to my salary and this enabled us to purchase a larger apartment”
Russell Maddison, 39 years old, and his wife Hyun Kim (known as Helen), currently live in Barratt London’s Hendon Waterside development in north London.
Just three years after purchasing their one-bedroom apartment, the couple has purchased a larger two-bedroom property in the same development. Maddison explains how.
"We were quite keen on moving into a regeneration area as it helped with our budget, and we did our research, looked at the plans and considered the potential of the whole area, not just what we could see at the time.
"The decision certainly paid off, because just three years later the one-bedroom apartment we had bought for £202,000 was now worth £320,000, thanks mainly to the boost in prices caused by the regeneration of the area.
"I’ve even worked out that the amount we earned on our apartment is close to my salary and this enabled us to purchase a larger two-bedroom apartment in the same development for £465,000.
"It’s a great feeling when you see the prices going up when you have bought at an early stage. But you do have to have a careful eye, you need to be able to see ahead, look at the plans and what is there in the pipeline and try to visualise the end product."
Top 10 areas where homes have ‘earned’ more than the average salary
| Area | Average salary | Average property value | Percentage of homes that have risen in value by more than the average salary in the past year | Number of homes that have risen in value by more than the average salary in the past year |
|---|---|---|---|---|
| Hastings, East Sussex | £25,800 | £285,000 | 62% | 18,000 |
| Adur, East Sussex | £26,700 | £382,000 | 60% | 14,000 |
| Mole Valley, Surrey | £30,400 | £649,000 | 54% | 17,000 |
| Rother, East Sussex | £27,200 | £358,000 | 51% | 21,000 |
| Dorset | £28,000 | £352,000 | 47% | 71,000 |
| St Albans, Hertfordshire | £42,600 | £663,000 | 46% | 24,000 |
| Cotswold, Gloucestershire | £29,900 | £442,000 | 46% | 21,000 |
| Sevenoaks, Kent | £35,300 | £501,000 | 45% | 24,000 |
| Bromley, south east London | £41,900 | £552,000 | 45% | 51,000 |
| South Lakeland, Cumbria | £27,900 | £295,000 | 45% | 21,000 |
Research
Hastings in East Sussex has topped the ranking with the highest proportion of properties that have increased in value by more than the average pay packet during the past year at 62%, followed by Adur, also in East Sussex, at 60%.
The strong house price rises in these locations reflect the current trend among homeowners to relocate from urban to more rural areas during the pandemic.
Coastal locations were also popular, with 47% of properties in Dorset recording value increases that outstripped average salaries, while the rural locations of the Cotswolds and South Lakeland also made it into the top 10.
Another trend was strong price rises in commuter hotspots, with 54% of properties in Mole Valley, Surrey, increasing in price by more than the average salary, as did 46% of homes in St Albans and 45% in both Sevenoaks in Kent, and Bromley, south east London.
The regional picture
| Region | Average salary | Average property value | Percentage of homes that have risen in value by more than the average salary in the past year | Number of homes that have risen in value by more than the average salary in the past year |
|---|---|---|---|---|
| South east | £32,900 | £379,000 | 28% | 927,000 |
| London | £37,300 | £521,000 | 24% | 625,000 |
| South west | £29,000 | £300,000 | 29% | 620,000 |
| East of England | £31,500 | £333,000 | 23% | 514,000 |
| North west | £27,800 | £189,000 | 18% | 474,000 |
| Yorkshire & the Humber | £28,700 | £183,000 | 17% | 321,000 |
| East Midlands | £28,100 | £224,000 | 17% | 294,000 |
| West Midlands | £30,200 | £218,000 | 14% | 289,000 |
| Wales | £28,200 | £188,000 | 22% | 256,000 |
| Scotland | £34,100 | £168,000 | 9% | 165,000 |
| North east | £33,700 | £144,000 | 9% | 88,000 |
| UK | £30,500 | £265,000 | 21% | 4.6m |
Homes in the south west were most likely to see price rises that outstripped the average salary at 29%, followed by the south east at 28%.
Nearly one in four homes in London also increased in value by more than local pay during the past year, despite the fact that salaries in the capital are the highest in the UK at an average of £37,300.
Although house price growth in northern regions has been strong in percentage terms during the past year, the lower average values of properties there meant the gains have been lower in monetary terms.
Even so, nearly one in five properties in the north west saw price gains that outstripped average local pay.
Why is this happening?
Demand from potential buyers has been strong since the housing market reopened after the first national lockdown, with buyers looking for more space and a different lifestyle as they no longer had to commute to work on a daily basis.
The stamp duty holiday has also helped to fuel momentum in the housing market.
Our Head of research, said: "Hundreds of thousands of households have made the move into their new home over the last year.
"But activity has been so high, it has eroded the stock of homes for sale, which has put upward pressure on house prices, with values rising by up to 9% in some parts of the country."
1.8m homes pushed into higher stamp duty bands
Some buyers are set to fork out thousands of pounds more in stamp duty once the tax break draws to a complete close at the end of September. Could you be one of them?
Soaring house price growth has pushed more than 1.8m homes in England into higher stamp duty bands.
House prices have jumped by more than £10,000 during the past year as the scramble for homes continues.
And this house price growth is having a knock-on effect on stamp duty bills because the tax is based on a property’s price. It is charged on a tiered basis so buyers only pay the higher rates on the slice above any threshold – the same as income tax.
An estimated 940,000 properties have moved into the 5% stamp duty band, while 130,000 have moved into the 10% one.
At the same time, the number of homes in the lower stamp duty bands is falling.
Find out more about how stamp duty works further down this article.
What could this mean for you?
Put simply, some buyers face a bigger stamp duty bill.
Buyers purchasing a home that has moved into the 5% band face an additional cost of £725 on average once the tapered stamp duty holiday ends on 30 September.
Meanwhile those buying a property that has moved into the 10% band could expect to pay £6,100 more.
The situation should have less impact on first-time buyers, as they do not pay the tax on the first £300,000 of a property purchase, as long as the home they are buying does not cost more than £500,000.
But the strong house price rises seen during the past year could still make it harder for first-time buyers to get onto the property ladder, as affordability may be more stretched, and they will need a bigger deposit.
Why is this happening?
The housing market has been booming during the past year due to a combination of the stamp duty holiday and successive lockdowns causing people to re-evaluate the type of home they want to live in.
Our latest House Price Index shows that annual house price growth was running at 4.7% in May, more than double the rate of 2.2% seen in the same month last year.
The strong price growth has added £10,246 to the value of the typical home, enough to push many properties into a higher stamp duty band.
The lowdown on stamp duty
Buyers pay stamp duty when purchasing a property in England or Northern Ireland.
Last year, the Chancellor introduced a stamp duty holiday on properties costing up to £500,000. Although this has now ended, the threshold at which the tax kicks in will remain at £250,001 until 30 September 2021.
After this date, no stamp duty will be charged on the first £125,000 of a purchase, with the tax charged at:
- 2% on the portion from £125,001 to £250,000
- 5% on the portion from £250,001 to £925,000
- 10% on the portion from £925,000 to £1.5m
- 12% on the portion above £1.5m
It's worth remembering that stamp duty rates in England and Northern Ireland are different for first-time buyers and people buying additional property.
Top three takeaways
- Strong house price growth has pushed more than 1.8m homes in England into a higher stamp duty bracket during the past year
- Buyers purchasing a home that has moved into the 5% band face an additional cost of £725 on average once the tapered stamp duty holiday ends on 30 September.
- Meanwhile those buying a property that has moved into the 10% band could expect to pay £6,100 more.
Stamp duty holiday extension: everything you need to know
You can still save up to £2,500 in stamp duty if you buy a home before the end of September. Our guide has all the details.
The full stamp duty holiday has now drawn to a close but there’s still a tax break available on the first £250,000 of a property purchase until the end of September.
Chancellor Rishi Sunak extended the stamp duty holiday earlier this year. It meant that buyers in England and Northern Ireland would not have to pay stamp duty on the first £500,000 of property if they complete – in other words, legally transfer ownership – before 30 June 2021.
To avoid a ‘cliff edge’ at the end of this period, the threshold at which stamp duty kicks in then dropped from £500,001 to £250,001 until 30 September 2021.
Normal stamp duty rates will apply from 1 October 2021.
It’s worth remembering that there’s stamp duty relief available for first-time buyers beyond the current stamp duty holiday.
So is there still time to take advantage of the stamp duty holiday?
Yes, there’s still a window of opportunity to secure a stamp duty saving. But if you're looking to complete on your property purchase by the end of September, when the tax break is wound down completely, you'll need to have your ducks in a row well beforehand.
In a normal year, it would take on average three months from a sale being agreed to completion. But given the uptick in activity over the past year, the average time it takes for a sale to cross the line is now four months.
There's a number of ways to boost your chances of buying in time, from staying in close contact with your conveyancer, to buying a property via an auctioneer.
As the full stamp duty holiday on the first £500,000 of a property’s purchase price drew to a close at the end of June, We calculated that over 50,000 buyers in England could have been at risk of missing out on the maximum savings due to extreme pressure on and delays to the transaction pipeline.
Head of research, explained: "The busy market is being driven by a once-in-a-generation re-assessment of home as a result of the pandemic.
"This has led hundreds of thousands of households to reflect on how and where they want to live – and they are making a move as a result, with family houses most in demand.
"This trend has been certainly boosted by the stamp duty savings on offer due to the stamp duty holiday, but levels of sales activity in recent months have remained high, with many of these buyers now only expecting the lower, tapered, stamp duty exemption of up to £2,500 because of the longer timeframe to complete a sale."
The Chancellor originally announced the stamp duty holiday in July 2020 to help kickstart the housing market in England and Northern Ireland following the first national lockdown.
The tax break, combined with many people carrying out a ‘once-in-a-lifetime’ re-assessment of their housing needs in the face of the pandemic, triggered a mini home buying boom.
But the steep spike in housing transactions led to a congested sales pipeline and the home buying process taking longer than usual.
We estimated that around 70,000 people who agreed sales in 2020 were in danger of missing the 31 March deadline.
And a petition calling for the stamp duty holiday to be extended received more than 100,000 signatures, triggering a debate to be held in Parliament in February.
What are the stamp duty rates from 1 October 2021?
The former stamp duty rules will apply from 1 October 2021. This means buyers can be charged between 2% and 12% tax (or up to 17% if they are a foreign investor) on their property purchase, depending on the value of the home they are buying and if they own more than one property.
Stamp duty is calculated as a percentage of the property you are buying. It applies to freehold and leasehold properties, whether you’re buying outright or with a mortgage.
For existing homeowners, the rates are:
- 0% up to £125,000
- 2% on £125,001 - £250,000
- 5% on £250,001 - £925,000
- 10% on £925,001 - £1.5m
- 12% on any value above £1.5m
For example, if you buy a flat for £275,000, the stamp duty you owe would be:
- 0% on the first £125,000 = £0
- 2% on the next £125,000 = £2,500
- 5% on the final £25,000 = £1,250
Total stamp duty = £3,750
Read our guide to find out more about stamp duty and how it's calculated.
Landlords and second-home owners
For owners of more than one property, a surcharge of 3% on top of the standard stamp duty rates apply.
However, if you sell a home within three years of purchasing a second property, you can apply for a refund of that 3%.
It is also possible under some circumstances to claim multiple dwellings relief.
Dig into the detail in our Q&A on the 3% surcharge.
Non-UK residents
There’s been an additional 2% stamp duty levy on non-UK residents who buy property in England and Northern Ireland since April 2021.
It means that international buyers of second homes could pay up to 17% tax on expensive properties.
The 2% is on top of standard rates and in addition to the 3% surcharge for any investors who own property elsewhere.
First-time buyers
First-time buyers are exempt from paying regular stamp duty on properties costing up to £300,000 and pay 5% on the value of a property between £300,000 and £500,000.
A first-time buyer will pay:
- 0% on the first £300,000
- 5% on the remainder up to £500,000
So a first-time buyer purchasing a £275,000 flat would pay no stamp duty.
For a house costing £475,000, a first-time buyer would pay:
- 0% on the first £300,000 = £0
- 5% on the final £175,000 = £8,750
Total stamp duty = £8,750
However, if the purchase price is more than £500,000, first-time buyers cannot claim the relief and must pay the standard rates.
For example, a property purchased at £700,000 would result in a stamp duty bill totalling £25,000 even for a first-time buyer.
Stamp duty relief was introduced in November 2017 to help people step onto the property ladder.
Our guide on the first-time buyer exemption has more detail.
When do you pay stamp duty?
You must pay stamp duty within 14 days of completing your property purchase. Your solicitor or conveyancer will usually file this return and transfer the money on your behalf.
What other government support is available?
The government has a number of schemes available to help buyers. They include:
- First Homes, which offers local first-time buyers and key workers a 30% to 50% discount on the purchase of their first home
- Mortgage guarantee, under which buyers can take out a 95% mortgage, with the government acting as guarantor
- Help to Buy, which offers an equity loan to buyers with a 5% deposit
- Shared Ownership, a part-buy, part-rent scheme.
It's also a good idea to check out the initiatives and allowances you could benefit from this tax year.
What about stamp duty in Scotland and Wales?
Housing is a devolved issue in Britain so stamp duty only applies in England and Northern Ireland.
Scotland and Wales have equivalent taxes. Similar breaks were introduced but have now ended.
Scotland
In April 2015, stamp duty was replaced by Land and Buildings Transaction Tax (LBTT).
In Scotland, the LBTT rates are:
- 0% up to £145,000
- 2% on £145,001-£250,000
- 5% on £250,001-£325,000
- 10% on £325,001-£750,000
- 12% on any value above £750,000
First-time buyers pay no LBTT up to £175,000.
Wales
Property owners in Wales have paid Land Transaction Tax (LTT) since April 2018.
LTT rates are:
- 0% up to £180,000
- 3.5% on £180,001-£250,000
- 5% on £250,001-£400,000
- 7.5% on £400,001-£750,000
- 10% on £750,001-£1.5m
- 12% on any value above £1.5m
The Welsh government introduced an additional charge for second-home owners.
Second home-owners now pay a 4% levy when they buy homes up to £180,000, rising to 16% for homes worth £1.6m or above.
Stamp duty holiday explainer
The full stamp duty holiday on the first £500,000 of a property’s purchase price may now be over but you could still benefit from the tax cut. Our guide explains how.
Stamp duty rates have now changed as the Chancellor’s tax holiday starts to be wound down.
The threshold at which stamp duty kicks in has dropped from £500,001 to £250,001 until 30 September 2021.
It will then fall back to its usual level of £125,001 on 1 October 2021.
Here’s our guide with more detail on what exactly the stamp duty holiday is – and how you could still benefit from it.
First of all, what is stamp duty?
Under normal circumstances, buyers must pay stamp duty when buying a home or a piece of land worth £125,001 or more in England and Northern Ireland.
It is charged on a tiered basis (so you only pay the higher rates on the slice above any threshold – the same as income tax).
These are the rates:
- Up to £125,000: 0%
- On the portion from £125,001 to £250,000: 2%
- On the portion from £250,001 to £925,000: 5%
- On the portion from £925,000 to £1.5m: 10%
- Above £1.5m: 12%
There are exemptions available for first-time buyers beyond the current stamp duty holiday. They don’t have to pay stamp duty on the first £300,000, so long as the home doesn’t cost more than £500,000.
Meanwhile, people buying additional property for £40,000 or more, such as second homes, pay an extra 3% of stamp duty on top of regular stamp duty rates. The surcharge effectively works as a slab tax. In other words, the 3% loading applies to the entire purchase price of the property.
There’s also been an additional 2% stamp duty levy on non-UK residents who buy property in England and Northern Ireland since April 2021.
Find out more in our guide on stamp duty and how to calculate it.
So how does the stamp duty holiday work?
The Chancellor, Rishi Sunak, unveiled a stamp duty holiday last July in a bid to boost the housing market after the first national lockdown.
He raised the threshold at which buyers start paying stamp duty with immediate effect, from £125,001 to £500,001, in England and Northern Ireland.
It meant that nearly nine out of 10 transactions were no longer subject to stamp duty, with the average bill falling by £4,500.
These are the full stamp duty holiday rates:
- Up to £500,000: 0%
- On the portion from £500,001 to £925,000: 5%
- On the portion from £925,001 to £1.5m: 10%
- Above £1.5m: 12%
And here's our handy interactive table revealing the savings on offer under the stamp duty holiday on the first £500,000 of property.
The stamp duty holiday was set to run until 31 March 2021. But in the Budget earlier this year, Sunak moved the deadline until the end of June 2021.
And to avoid a ‘cliff edge’ when this period ended, the threshold at which stamp duty kicks in then dropped from £500,001 to £250,001 until 30 September 2021.
The 3% stamp duty surcharge applies on top of the stamp duty holiday rates. This still results in a saving, because the 3% rate is normally applied on the first £125,000, with higher rates above that.
Similar ‘holidays’ were introduced last year in Scotland and Wales, where the property tax is different. But both have now ended.
The Scottish government increased the threshold of its Land and Buildings Transaction Tax (LBTT) from £145,000 to £250,000.
And the Welsh government raised the threshold of its Land Transaction Tax (LTT) from £180,000 also to £250,000.
Why was the stamp duty holiday extended?
The stamp duty holiday, combined with many people reassessing their homes and lifestyles during the pandemic, prompted a jump in housing transactions.
It led to a congested sales pipeline and the home buying process taking longer than usual.
As a result, around 70,000 people who agreed sales in 2020 were in danger of missing the 31 March deadline, according to our research.
And a petition calling for the stamp duty holiday to be extended received more than 100,000 signatures, triggering a debate to be held in Parliament in February.
Can you still take advantage of the stamp duty holiday?
Yes, there’s still scope to save up to £2,500 if you complete before the end of September, when the stamp duty holiday is wound down completely.
It’s worth noting that in a normal year, it would take on average three months from a sale being agreed to completion. But given the uptick in activity over the past year, the average time for a sale to cross the line is now four months.
The good news is that there’s a number of ways to boost your chances of meeting the final deadline, from staying in close contact with your conveyancer, to buying a property via an auctioneer.
Head of research explained: "The busy market is being driven by a once-in-a-generation re-assessment of home as a result of the pandemic.
"This has led hundreds of thousands of households to reflect on how and where they want to live – and they are making a move as a result, with family houses most in demand. "This trend has been certainly boosted by the stamp duty savings on offer due to the stamp duty holiday, but levels of sales activity in recent months have remained high, with many of these buyers now only expecting the lower, tapered, stamp duty exemption of up to £2,500 because of the longer timeframe to complete a sale."
Tell me a bit about the background of stamp duty
The government introduced historic reforms to stamp duty in 2014. It saw the method of calculating the tax change - as well as the rates (Scotland followed with changes in 2015).
This effectively cut the tax bill on homes worth up to £940,000 (which account for more than 95% of households) but cranked up the charges for more expensive properties.
In 2009, the most expensive stamp duty band was 4%. This is now 12%, rising to 17% for overseas buyers purchasing in England from April.
New-build home development hits 21-year high
The number of new homes being built in England hit a 21-year high in the first quarter of this year. And 81% of them are houses.
The new homes industry got off to a flying start this year as it continued to recover from Covid-19 disruption.
A total of 49,470 properties were completed between January and March, the highest level since figures were first collected in their current format in 2000.
Meanwhile, the number of houses in development accounted for 81% of all new builds, the highest proportion since 2000/01.
There was also a steep jump in the number of new-build starts, with the first phase of construction hitting a near-15 year high, according to the Ministry of Housing, Communities and Local Government.
Why is this happening?
The housebuilding industry was hit hard in the early stages of the pandemic, when construction sites were forced to close during lockdowns.
But the Government has since introduced a range of measures to enable building to continue, while also keeping workers safe, including allowing builders to negotiate flexible working hours on construction sites with their local council.
The measures have led to a steady increase in the number of new homes being completed, since a low point in the second quarter of last year.
Who does it affect?
The Covid-19 pandemic has seen people undertake a once-in-a-lifetime reassessment of their housing needs, as they search for more space following successive lockdowns.
The good news for potential buyers who want to purchase a new-build property is that 81% of homes completed during the first quarter were houses, rather than flats, the highest level since 2000/01.
In regional terms, the proportion of new homes being completed was highest in the South East, East Midlands and East of England, while new-build starts were highest in the South West and East of England.
The jump in new properties being built particularly benefits first-time buyers, who can use the Help to Buy scheme to purchase a new-build home with just a 5% deposit.
What’s the background?
It has previously been estimated that the UK needs between 240,000 and 340,000 new homes a year to keep pace with rising demand.
Only 155,960 new homes were completed in the year to the end of March, 11% fewer than in the previous 12 months, as Covid-19-related disruption continued to impact figures.
Before the pandemic struck, the number of new homes being built had been on a steady upward trend since 2014.
But building new homes is only one way in which properties are added to the available housing stock.
Residential properties are also created through the conversion of existing buildings, such as factories, offices and farm buildings into homes, or dividing large houses into flats.
In the year to the end of March, applications for Energy Performance Certificates on new dwellings totalled 220,730, suggesting the overall increase in homes in England was significantly higher than just the new-build figures suggest.
Top three takeaways
- The number of new homes being built in England hit a 21-year high during the first quarter as the industry continued to recover from Covid-19 disruption
- A total of 49,470 properties were completed during the three months to the end of March, the highest level since the figures began being collected in their current form in 2000
- Houses accounted for 81% of all new properties built, the highest proportion since 2000/01
House prices jump by £10,000 in a year
High demand from potential buyers and a shortage of homes for sale makes it the fastest-moving housing market for five years, our latest House Price Index report shows.
House prices have soared by more than £10,000 during the past year as the scramble for homes continues.
The increase, which is the largest rise in value recorded since October 2016, left the average home costing £229,300 in May, according to our latest monthly House Price I report.
This house price growth has pushed 1.8 million properties into a higher stamp duty bracket.
High demand from potential buyers has also led to the average time it takes to sell a home nearly halving to just 22 days, down from 42 days in May 2019. It makes it the fastest-moving housing market for five years.
But there are signs that the market is beginning to cool as the stamp duty holiday on homes costing up to £500,000 comes to an end.
What’s happening to house prices?
Annual house price growth was 4.7% in May – more than double the 2.2% it was running at in the same month of 2020.
House prices are rising fastest in the most affordable markets, with growth in Wales hitting a 10-year high of 7.1%, while property values rose by 6.8% in Northern Ireland and 6.2% in Yorkshire & the Humber.
Meanwhile, in London house prices rose by just 2.2% – the seventh month running during which the capital recorded the lowest gains in the UK.
In terms of individual cities, Liverpool and Manchester continued to record the highest price growth at 7.9% and 7.2% respectively.
Buyer demand is down 28% from its pandemic peak, moderated by the end of the full stamp duty holiday on the first £500,000 of property this month. But to put this into context, it remains 55% higher than in the more ‘normal’ market of 2019.
Demand is being driven by a combination of greater mortgage availability for first-time buyers, the stamp duty holiday (which draws to a complete close at the end of September) and a pandemic-led once-in-a-lifetime reassessment of housing needs, which has seen many people search for more space.
Demand is highest for homes costing up to £250,000, which are exempt from stamp duty until the end of September.
While the number of buyers looking for properties below £250,000 is down 24% from April’s highs in England, it remains 75% higher than the average recorded in the ‘normal’ market of 2019.
At the same time, demand for homes worth more than £250,000 has dipped by a third since April, but it remains up 86% compared to average levels in 2019.
Meanwhile, the number of homes for sale is 24% lower in the first half of this year compared to 2020.
One of the reasons for this is that first-time buyers are flocking to the housing market and buying a home without having one to sell - in other words, they are not replenishing stock levels. Aspiring homeowners are being spurred on in part by the first-time buyer stamp duty exemption that extends beyond the June deadline as well as having a wider range of mortgages to choose from.
What could this mean for you?
First-time buyers and home-movers
Activity levels remain high among first-time buyers and home-movers, and the supply of homes for sale is not keeping pace with demand.
As a result, you can expect to face stiff competition for those homes that are on the market, particularly if you are looking for somewhere costing up to £250,000.
You should try to get your ducks in a row, such as lining up a mortgage offer in principle or having a clear idea of exactly how much you can borrow, so that you can move quickly and put in an offer when you do see somewhere you like.
Sellers
With demand remaining strong and a shortage of homes for sale, now is a great time to list your property if you are thinking of selling, particularly if your home is worth less than £250,000.
Things are likely to be trickier if you are also looking to purchase a home as well, as while your current property is likely to sell quickly, it may take longer to find a home to buy, given the current shortage of listings. As a result, do your homework before you list your property.
Co-ordinating your sale and purchase could be tricky in the current market due to the mismatch between supply and demand, so it may be worth considering doing it in stages if you have somewhere you could stay in the interim.
What’s the outlook?
While the stamp duty holiday boosted activity, demand from potential buyers remains high despite the first phase of the holiday ending, suggesting the once-in-a-generation reassessment of housing needs still has further to run.
Meanwhile, although demand may ease as the economy continues to reopen, enabling people travel more widely and enjoy leisure activities that have previously not been allowed, many workers are likely to receive clarification on whether they are going to be expected back in the office full time.
Those who are not, may decide to go ahead with a move they had been putting off until they had received clarification on this issue.
Head of research said: “The total stock of homes for sale continues to run well below historical norms, and this will underpin pricing.
“At the same time, it may also constrain potential activity, especially for buyers looking for family houses. Even so, we forecast that this year will be one of the busiest for the housing market since the global financial crisis - with 1.5 million residential transactions.”
Garage conversions on the up: we reveal the most popular home improvements in the UK
If successive lockdowns have had you reassessing your home and lifestyle, you’re not alone. We look at the home improvements that are in hot demand.
Homeowners focused on increasing their space and improving their gardens during 2020 as successive lockdowns forced people to spend more time at home.
With the housing market closed for business in the early part of the year, many people looked to improve their existing space instead of trading up the property ladder.
Successive lockdowns also led to a significant desire among homeowners to have a better property, particularly as working from home looks likely to become the new normal for many.
Meanwhile, as people spent less money on holidays, entertainment and eating out, they had more spare cash to invest in their property, with the Bank of England estimating households collectively set aside £125bn of extra savings between March and November 2020.
The net result was a 25% jump in the number of planning applications for home improvements submitted in 2020, compared with the five-year average.
Which home improvements are on the up?
Planning applications to develop garages soared by 25.3% during the year, while there was a 7.5% rise in people seeking permission for garden buildings and works.
Meanwhile, planning applications for an extension were up 4.3%, according to research by Barbour ABI.
By contrast, planning applications submitted for conservatories dived by 20.9% year-on-year, while the number of people looking to do a loft conversion fell by 2.3%.
The group said the trends showed that people were not only looking for more space during 2020, but they were also keen to make the best use of the space they had.
Another notable trend was a significant increase in homeowners seeking to install solar panels towards the end of the year, which Barbour ABI attributed to people becoming more conscious of environmental issues during the pandemic, as well as an increased desire to be self-sufficient.
Why is this happening?
Successive lockdowns have led to people spending more time at home, with many people working from home for the first time.
As a result, homeowners have become very focused on making better use of the space they have.
Rather than seeing garages as a place for cars, people were instead viewing them as somewhere to store things to free up space in their home, a place to transform into a home office or even as an extension of their property, according to Barbour ABI.
Lockdowns have also prompted people to reconnect with their gardens, particularly due to the good weather during the first national lockdown.
What are the most popular home improvements?
House prices, population density and outside space all greatly influenced the type of home improvements that were undertaken in different regions of the country.
Extensions
Building an extension continued to be the most popular type of home improvement, accounting for 81.7% of all planning applications for homes across the UK.
They were most popular in northern regions, many of which saw double-digit increases in planning applications.
This trend is likely to have been driven by the strong house price growth the northern regions have seen in recent years, making building an extension more attractive financially than moving home.
Garages
Extensions were followed by garages in the popularity stakes, as people looked to build or convert a garage as a way of expanding their home.
The steep increase in planning applications for garages reversed the previous declining trend. It is likely that in many cases, garages were doubling as a home office or workspace.
While applications for garages rose most in Scotland, big increases were also recorded in the East of England and East Midlands.
Loft conversions
Loft conversions were most popular in London and the south east, where they accounted for nearly one in five of all improvement applications.
The group said this is likely to reflect the shortage of garden space homeowners in London may have in which to build an extension, with loft conversions tending to be popular in areas where garden space is at a premium.
At the same time, the higher cost of having a loft conversion done compared with an extension meant house prices needed to be correspondingly higher to justify the work.
Conservatories and garden buildings
Conservatories and garden buildings were most popular in the south west and Wales, possibly reflecting the more rural nature of these regions and the larger gardens of those living there, as well as the popularity of conservatories with retirees.
That said, it should be noted that most conservatory providers offer products with dimensions that do not require planning permission to be installed, so the figures may not reflect the true popularity of conservatories.
The important role played by gardens last year across the whole of Great Britain is reflected by the fact that applications for outside-the-house improvements saw a sizable jump in all regions of the country apart from the north east.
Basements
After a steep rise in the popularity of basement developments in London between 2013 and 2016, applications for this improvement have been in steady decline.
ABI Barbour explains that economically, basements only tend to work in locations with high land prices, so that the high cost of having the work done translates into a sufficiently large increase in the value of the property to make it worthwhile.
As money flooded into the London market, basement applications boomed, but once the market started to lose its heat around 2016, demand for basement developments fell back again.
Who are the big spenders?
During the past 15 to 20 years baby boomers have had the biggest impact on home improvements, as this generation not only benefited from high levels of housing wealth, but they also appreciated the value home improvements could add to their property and aspired to live in a home tailored to their own needs.
While those aged between 57 and 75 are still significant home improvement spenders, it is people aged between 30 and 49, an even split of younger generation X and older Millennials, who are now spending the most.
In terms of household type, families with two adults and children are the biggest spenders on home improvements, followed by homes occupied by two retired adults, and those with three or more adults and no children, possibly reflecting the trend for adult children to return to their parent’s home.
Home improvement need-to-knows
It took an average of 55 days to receive a decision on a planning application across all regions of Great Britain in 2020, slightly up on the 54 days taken in 2018 and 2019.
More than 85% of applications were approved, with just 10% refused, while just over 4% were withdrawn.
London had the lowest level of approvals with 75% of applications given the go-ahead. In the south east and east of England approvals were also slightly below the national average.
But in other regions of the country, around nine out of 10 applications were approved.
London’s lower approval rate is likely to be due to a combination of higher housing density in the capital, meaning neighbours may be more likely to object to applications, as well as higher house prices, which may incentivise applicants to submit more ambitious improvement plans, as the potential gains of adding to their home are proportionately greater.
Top three takeaways
- Homeowners focused on increasing their space and improving their gardens during 2020 as successive lockdowns forced people to spend more time at home
- Building an extension continued to be the most popular type of home improvement
- There was a steep increase in applications for garages and garden buildings. By contrast, planning applications for conservatories and loft conversions fell