Has the Stamp Duty holiday changed the UK property market forever?

As the Stamp Duty holiday comes to an end, Kate Anderson looks at what it’s done to the housing market – and whether the changes are here to stay.

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The Stamp Duty holiday is finally coming to an end. As of 1 October, the land tax thresholds will return to normal. But what state does it leave the property market in? With record rises in house prices and a change in what buyers are demanding, will the UK property market ever be the same again?


What effect has the Stamp Duty holiday had?

Since its introduction in July 2020, the Stamp Duty holiday has reinvigorated the housing market. We have seen house prices reach record highs. HMRC has reported that the number of property transactions increased by 219% from June 2020 to June 2021.

Yet, it’s not just the headline figures that we should be paying attention to. The Stamp Duty holiday has also changed what buyers are looking for – and who can get on the property ladder.

The booming second homes market, which began after the first lockdown, shows no signs of letting up. Knight Frank found that the year of the staycation drove the number of transactions liable for the second home 3% surcharge to reach 84,700 in Q2.

But it’s first-time buyers that are missing out. The increase in house prices has made it that much harder to get onto the property ladder. GetAgent.co.uk found that the average home bought by first-time buyers now costs £236,982. That’s an increase of 11.7%!

The higher prices are, the bigger the deposit first-time buyers have to save up. And with such high demand for property, a lot of them are losing out.

So will this be the state of things for the foreseeable future?

Will things stay this way?

Has the Stamp Duty holiday changed the makeup of the UK market? It’s definitely mixed things up in the short term. But that doesn’t mean that the market will remain this way permanently.

In reality, seasonal patterns are likely to re-establish themselves. It’s worth mentioning that the Stamp Duty holiday was just one part of the reason for the house price boom.

Pent-up demand from the first lockdown, mortgage rate price wars and the government’s 95% mortgage guarantee all played their part.

And let’s not forget the main characteristic of the UK housing market: not enough property to meet demand. There’s no doubt that the Stamp Duty holiday exacerbated this problem.

But it is something that us Brits have coped with for a long time – and it’s unlikely to change any time soon.


What does the market look like going forwards?

The demand for more living space seems to be here to stay. The pandemic has changed how lots of us work or view our homes. Many homeowners want more space to work remotely or want a second home as a staycation property.

There are also plenty of first-time buyers looking to get on the property ladder. Demand for smaller properties remains high, which is driving the lower end of the market.

All in all, a few characteristics from the Stamp Duty holiday are likely to be taken forward. But it hasn’t changed the essential makeup of the market. The existing strength of the UK housing market before the pandemic will mean that the bubble is unlikely to burst any time soon.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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