Stamp duty savings wiped out by inflated house prices – MIAC

Increases in house prices across the UK outweighed stamp duty savings during the tax break, an analysis has shown.

Increases in house prices across the UK outweighed stamp duty savings during the tax break, an analysis has shown.

A study from MIAC Property Analytics compared sold house prices in June 2020, the month before the introduction of the stamp duty holiday, to April this year.

Buyers in Westminster, London fared the worst during the stamp duty holiday as property prices rose by £136,889 to £1,759,530 from June last year to April this year.

While the break would have exempted them on paying a tax for the first £500,000 of the purchase price, they would have had to pay a levy of £109,894 this year compared to £108,467 last year.

On balance, Westminster buyers were £138,316 worse off when price changes were considered.

House prices in Waltham Forest would have fallen under the threshold last year as properties had an average price of £498,341. However, a £57,174 increase by April meant the maximum saving that could be made stood at £12,141 on an average property value of £555,515.

Factoring in price rises, transactions were in fact £45,033 more expensive for the Waltham Forest buyer.

Rutland in the East Midlands saw house prices surge to £447,235 over the analysed period, an increased of £49,263.

Although this remained below the new threshold, the £9,899 that would have been paid in stamp duty was outstripped by the change in property price, resulting in a £39,364 loss.

Buyers in Hammersmith and Fulham made the greatest saving, with a stamp duty reduction of £14,680 allowing buyers to save £8,272 despite the average price rising from £784,460 in June 2020 to £790,867 in April 2021.

MIAC Analytics’ managing director Darrel Welch, said: “The stamp duty holiday was an initiative designed to reboot a property market that had effectively stagnated as the pandemic and lockdown measures delayed completions and made house viewings virtually impossible.

“One of the unintended consequences of the stamp duty holiday has been a gold rush to complete before the respective deadlines, with the unprecedented demand pushing up prices in return.”

He added: “What this data shows is that a significant amount of the stamp duty saving made over the last year has simply been added onto the cost of the sale, in some cases adding tens of thousands of pounds on to a mortgage.

“This data provides a snapshot of the holiday’s impact in real time, but it will be at least six to 12 months down the line until we can understand the true impact. If house prices snap back to pre-pandemic trends, then thousands of people could be at risk of oversized mortgages and negative equity.”