Stamp Duty Savers May Have Actually Lost Out, Experts Claim

The stamp duty holiday in England and Northern Ireland was introduced to motivate movers and first-time buyers to take action in order to stimulate the stagnant housing market. Many thousands took full advantage of the offer, making savings of up to £15,000 on typical stamp duty liability.

Property experts are now claiming that the “knock-on effects” of the stamp duty holiday have actually left most new homeowners out of pocket. Even where the maximum £15,000 saving was leveraged, skyrocketing property prices have resulted in buyers paying more than they would have prior to the initiative’s introduction.

Commenting on behalf of Cornerstone Tax, principal consultant David Hannah highlighted the effects a sudden spike in demand has had on the housing market. According to the latest figures from Nationwide, average property prices have increased approximately 13.4% over the course of the past year.

This equates to around £22,000, significantly more than the £15,000 maximum stamp duty saving.

Consequently, many homebuyers will have found that the savings they made were nullified by the additional costs of purchasing a property.

The rush to borrow money

Others were so preoccupied with rushing home purchases that they unwittingly took out mortgages that were not the most cost-effective options available. Research suggests that up to 2.4 million movers over the past year overpaid by many thousands of pounds, having not selected the most economic products to suit their requirements.

In addition, approximately 13% were forced to borrow additional money at a cost in order to pay the fees associated with home purchases that they had not budgeted for.

Estimates now suggest that the average cost of moving house has risen to just under £9,000; combined with the enormous spike in average house prices over the past 12 months, the potential £15,000 stamp duty saving pales in comparison to the additional costs.

An inevitable bubble

Mr Hannah went on to comment on the real estate market’s current lack of stability while emphasising the importance of affordable homes as a means to solve the country’s growing housing crisis.

“The initial saving was obviously enticing; however, as the holiday and therefore the property market gathered momentum, the knock-on effects of this have resulted in an increase in costs for many buyers, rather than the huge savings initially hoped for,” he said.

“Of course, a spark in the property market has knock-on effects for the rest of the economy, providing work and growth for everyone involved in building, selling, processing, and moving people into homes.”

“However, growth must be sustainable and stable, and if we want people to really benefit from a better property market, we need more homes that are more affordable to more people—and to avoid a bubble bursting.”