How will the housing market fare after the stamp duty holiday?

How will the housing market fare after the stamp duty holiday?
Credit: Jason Alden/Bloomberg

The housing market has come a long way since the country entered its first lockdown more than a year ago.

In mid-May last year the housing secretary lifted the freeze on home moves in England – which for seven weeks had been prohibited unless “reasonably necessary” – with Scotland and Wales following a month later.

After the chancellor announced a stamp duty cut in July to “catalyse the housing market and boost confidence”, the market has seen average house prices and mortgage borrowing hit record highs.

But how will the market fare when the current stamp duty holiday ends on June 30?

April slowdown

Statistics show a fall in mortgage borrowing and transactions in the month after the stamp duty holiday was originally due to end.

The latest figures from the Bank of England show mortgage borrowing fell in April, with net borrowing at £3.3bn – down from the record of £11.5bn in the previous month, and lower than the monthly average of £5.7bn borrowed in the six months to February.

And provisional figures from HM Revenue & Customs show residential property transactions dropped to an estimated 111,260 in April, down by more than a third from 173,410 in March (non-seasonally adjusted).

House prices, meanwhile, rose in April, with Nationwide’s index showing prices were up by 2.1 per cent month-on-month, to reach an average of £238,831.

The building society’s chief economist, Robert Gardner, says the extended tax relief prompted a “re-acceleration” in April, after the previous month saw a slowdown in house price growth in view of the original stamp duty holiday deadline.

However, Tim Bannister, property expert at Rightmove, expects market activity to remain strong for at least the rest of the year, despite the tapering and end of the stamp duty holiday in June and September.

Bannister says: “Right now many of the homes in the huge pipeline going through will not be expecting to make the June stamp duty deadline.”

Homebuyers who miss the June deadline for the stamp duty holiday will see the tax kick in above £250,000 of the property price until the end of September, in place of the current nil rate band of £500,000.

However, last month, a survey of more than 1,000 homebuyers by estate agent Barrows and Forrester revealed four in five (81 per cent) said they expected to miss the September deadline for the £250,000 threshold.

Coming out of lockdown

John Phillips, national operations director at Just Mortgages and estate agency group Spicerhaart, says the reopening of the hospitality and travel industries will have a greater impact on the market than the end of the stamp duty holiday.

Phillips says: “Buying a house will still be a priority for many, but there will be lots of people booking holidays after a year stuck in the UK and savings may be spent on a few weeks in the sun. This may result in a few people deciding to put a purchase on hold as the UK reopens fully.