Homebuyers race to beat stamp duty holiday deadline as house prices jump £57,000 in lockdown

Homeowners in England and Wales in the race to move home during the stamp duty holiday period are saving on average £11,566 – offsetting the cost of house price increases as a result of the pandemic property market mini-boom.

The average house price for homemovers in the 6 months to June 2020 was £373,537, but this increased by £57,790 during the stamp duty holiday period to £431,327 in the 6 months to Dec 2020. While the threshold for stamp duty was increased to £500,000, based on the average house price for homemovers, this meant in England, only those in London and the South East still had to pay on average £9,848 and £925 respectively. In Wales, where the devolved nation’s rules differ, the average stamp duty paid was £379.

While homemovers saved money on stamp duty, they have faced the challenge of even bigger deposits (on average £11,558) thanks to the increase in house prices during that time.

Those who moved home in London have lower upfront costs of around £12,188, as the amount of deposit increased by an average £2,812 and fully offset by stamp duty holiday savings of £15,000. But this is the only region where the stamp duty savings offset the rise in average house price deposits.

Those moving home in the South East are £7,437 better off, with the growth in average deposit (£7,564) covered by stamp duty savings of £15,001. In West Midlands, the deposit rise of £5,686 has been fully offset by stamp duty savings of £6,225, with £539 to spare.

In the South West, where the average deposit has risen by £9,311, homemovers are £378 up after stamp duty savings of £9,689. Homemovers in all other regions have seen the savings in stamp duty partially offset the increase in average deposit cost.

Andy Bickers, Mortgages Director, Halifax, said:“Since the summer we have seen a huge surge in mortgage applications, as people raced to make much sought after stamp duty savings.

“We know that lockdown restrictions have made it more practically challenging for those buying and selling, but the stamp duty ‘holiday’ has been one of the main drivers of continued demand for sales and purchases during the pandemic and we will wait to see if further steps are taken that could give people more time.”

The proportion of homemovers paying stamp duty on transactions dropped from 93% in the six months to June 2020 to 26% in the six months to December, while the threshold was temporarily raised from £125,000 to £500,000.

There was also a significant drop in the number of first-time buyers paying stamp duty holiday – from 29% to 10% in the same period – although these are predominantly concentrated in London and the South East.

During the holiday period, 67% of homemovers in London paid stamp duty on their home purchase, followed by the South East (39%) – down from 100% in both regions. In the South West, 21% of those moving house and 19% in East Anglia paid stamp duty, compared to 98% in both regions prior to the ‘break’ taking effect.

The smallest proportion of homemovers in the North (4%) paid stamp duty – down from 74% pre-holiday, followed by Yorkshire and the Humber – from 84% down to 8% and East Midlands – from 93% to 10%.

Impact on first-time buyers

Before the stamp duty holiday, people buying their first home in London and the South East – where the price tags top the UK average of £266,381 (£480,221 and £310,986 respectively) – paid on average £9,011 in stamp duty, while those in the South East paid £549 in the six months to June 2020.

Those in the capital would have paid more than £712 more (£9,723) in stamp duty and those in the South East would have paid more than double – £1,417 in the six months to Dec 2020 because of an increase in house prices, had the temporary relief measures not been introduced.

While the ‘holiday’ has saved money for those first-time buyers, the increase in house prices in the second half of the year – up £19,858 to £286,239 – has meant that they will need a bigger deposit of around £57,248 to take their first step on the property ladder.

Only first-time buyers in London and the South East are saving money as a result of the stamp duty relief – in London the increase in deposit (£2,848 on average) offset by savings of £9,723 is leaving them £6,875 better off.

In the South East, first-time buyers are on average saving £2,054 as the increase in deposit (£3,471) has been partially offset by the stamp duty holiday savings of £1,417.

Almost four in 10 (38%) of first-time buyers in London paid stamp duty during the second half of 2020 – down from 86% before the holiday period started. Meanwhile in the South East this was down from 42% to 9%, followed by those in East Anglia and South West dropping from 18% and 15% respectively to 3% during the same period.