The Impact of the Stamp Duty Freeze in the UK on House Prices

Impact of the stamp duty freeze on the UK housing market.

The Impact of the Stamp Duty Freeze in the UK on House Prices

Since Chancellor Rishi Sunak announced the stamp duty holiday, many financial forecasts have been upgraded to a more positive outlook. That said, “some experts believe this was due only to the delay of these price drops, according to the Telegraph. The stamp duty holiday could save those purchasing a home a maximum of £15,000, pushing housing purchases to a record-breaking high.

However, some have a different opinion – they’re cautioning that the mini-boom will come to an end when the tax reduction does. Once the tax cut ends, the economy will begin to falter once again.  According to the Centre for Economics & Business Research, the cost of a home will fall by up to 14% once the tax holiday ends on 31 March 2021.

Benefits of Buying a Property

Those purchasing properties worth £500,000 or less won’t pay a tax, while those going for more expensive homes benefit from decreased prices. The new standards apply in Northern Ireland and England. Wales and Scotland have likewise launched stamp duty cuts. For the Scottish equivalent of the holiday, buildings and land transaction taxes will affect homes valued over £250,000, instead of £145,000 as in the past.

In the interim, potential buyers in Wales will pay stamp duties on purchases of £250,000, evaluated to £2,450 for every property. These will continue until March 2021. The news has whipped up a flurry of interest from prospective home-owners and is boosting the housing market in Britain. This all comes while the country is still facing approximately £27bn in losses caused Covid-19 market shutdown.

Jump Costs Worry

The commuter belt and outer boroughs in London will see large savings in local housing costs. These areas contain the biggest share of homes in the relatively unaffordable £400,000 to £500,000 price range. According to Hamptons International, in places like Spelthorne, South-west London, purchasers could save up to 2.5% of their total property value.

That said, analysts are worried about forecasting resultant cost jumps due to the broader economic situation. Lawrence Bowles, of the Savills Estate Agency, has predicted that there will be no substantial long-term effect on pricing, but the stamp duty holiday will boost transaction volumes.

Unanticipated Sales Surge

British Estate Agents have already been handling a surprising sales surge following a period of reduced interest due to lock lockdown combined with the desire to shift to bigger and greener homes. New house-viewing guidelines include banning open houses, limiting viewings to just individuals of one household, and requesting sellers to leave properties during viewings.

According to, demand has risen 46% above pre-lockdown levels, and agreed sales are currently 4% above the level seen at the beginning of March. During lockdown, the recovery rate remained significant, with agreed sales falling by 92% at one point. Pent-up demand, combined with a new desire for people to move, has fuelled a short-term boom, especially in prime rural markets. Purchasers are leaving London for more spacious properties in the northern towns.

Policy Implications

Nullifying stamp duty could significantly expand property holders’ mobility and make the current housing stock more productive and affordable. It seems that there is a good balance of young families looking for bigger homes and elderly households ready to cut back. The same revenue level will be collected with little-to-no societal welfare losses through an annual tax on property value or land value.

As opposed to stamp duty, these expenses don’t demoralize mutually beneficial transactions. If established as yearly local taxes, a land or property value tax would provide local authorities’ fiscal incentives to offer more land for residential development. A local annual tax on land or property value would also give higher incentives to proprietors to use land or property more effectively.

I set Volition Removals up in 2015 with my business partner Pawel. Our ambition has always been to take the stress out of moving home with a friendly and efficient service. We know its a big day for our customers so we do everything we can to make it go without a hitch.