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Stamp Duty holiday stimulated Buy-to-Let purchases in the South

London, the South East and the South West led the jump in buy-to-let house purchases during the Stamp Duty holiday, analysis by Paragon Bank has revealed.

Comparing the period when landlords received the full 3% Stamp Duty discount – July 2020 to June 2021 – with the last comparative period not impacted by Covid – July 2018 to June 2019 – showed the number of buy-to-let purchases increased by 52% in London.

Paragon’s analysis of industry data showed the South East recorded a 49% increase in purchase completions, whilst the South West saw buy-to-let purchases rise by 41%.

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At the other end of the scale, the West Midlands saw the smallest increase, with transactions rising by 12%, whilst Wales and Scotland, which had different housing stimulus measures, rose by 8% and 1% respectively.

The regions that saw the greatest increases were those where the Stamp Duty saving was greatest based on average house prices. Landlords could save up to £15,000 in Stamp Duty costs during the holiday period.

However, they were also the regions that saw the greatest falls in house purchases after the Stamp Duty 3% surcharge for buy-to-let and second homes was introduced in April 2016. Between 2015 – the last year before the surcharge was introduced – and 2019, buy-to-let purchases fell 55% in London and 51% in the South East, whilst the South West decreased 41%. Despite the Stamp Duty holiday, transactions during the July 2020 to June 2021 12-month period were still 30% below 2015 levels in London and 29% lower in the South East.

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RegionStamp Duty holiday % increase vs July 18 – June 19Proportion of BTL purchase (July 20 – June 21)July 20 – June 21 % decrease vs 2015
Greater London52%15.5%-30%
South East49%20%-29%
South West41%8.4%-17%
North East29%4.7%6%
East Anglia28%3.8%-15%
East Midlands24%8.2%-4%
North West17%11.9%-7%
Yorkshire & Humber17%8%8%
West Midlands12%9.6%2%
Wales8%3.7%-5%
Scotland1%6%-13%

Paragon Bank Managing Director of Mortgages Richard Rowntree said: “The impact of the Stamp Duty saving on regions where house prices are generally higher is clear to see, with transactions in London and the South increasing by approximately half. There were also strong increases in the South West, North East and East Anglia.

“Despite this, tenant demand still outweighs supply in large swathes of the country, which is leading to record levels of rental inflation, plus transactions still remain significantly below the level experienced before the Stamp Duty surcharge was introduced in 2016. As the Government pursues its Levelling Up agenda, it needs all facets of the housing market to be working effectively, including a sufficiently sized private rented sector to facilitate labour market mobility and provide good quality homes for those who cannot or don’t want to own a home”

Source: Property118

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What does the end of the stamp duty holiday mean for the market?

When the stamp duty holiday ended on 30 September, the property industry could finally breathe a sigh of relief. The market surged following the introduction of the tax break, combined with the release of pent-up demand during the height of the pandemic.

It successfully re-energised the market following its closure during the first national lockdown, keeping the economy moving. However, recent months saw many speculate on the future of the market following the stamp duty holiday deadline. Now it is time to consider what the end means for the industry.

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The stamp duty holiday cliff-edge

Fears of a cliff-edge started to be heard at the beginning of the year, as the original deadline approached. With thousands of prospective buyers at risk of not completing in time to benefit, the number of purchases with the potential of falling through was concerning.

These concerns fuelled calls from industry professionals to extend the planned deadline and taper it to avoid a hard stop. The thinking behind it was that it would give more purchases the chance to complete, which were already in progress.

When the extension and subsequent tapering were announced, the industry rejoiced. Although a minority of transactions did fall through, the completions prevented a knock-on effect for the rest of the market.

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The imbalance of supply and demand

The shortage of properties coming to the market is now in a fifth consecutive month. Latest reports show current numbers are lower than pre-pandemic levels, with prospective buyers remaining motivated to make their purchases.

But, while demand remains high, property prices have also risen. The average house price has increased by almost £30,000 since June last year, one month before the introduction of the stamp duty holiday.

While purchasers persist to buy their next properties, house prices may be set to increase further. This inflation has raised concerns for the future of house prices, but the market has not yet run out of steam.

However, prospective sellers may still be encouraged to list their properties. At present, the market is less frantic from not being in the height of the pandemic, is more appealing to sellers.

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Now the stamp duty holiday has ended, what is in store for the market?

The seller’s market is predicted to remain for a few more months at least and could span into the new year. However, if conditions remain as they are, the buyer’s frenzy is likely to wane.

While this may not result in property prices going down, it will help achieve equilibrium in the market. Still, many uncertainties remain, such as the possibilities of potential future lockdowns.

Another lockdown could spark the same desire in people to move on from their current property and reignite the market. This could delay the hope of achieving balance in the market considerably, but only time will tell.

After a turbulent 18 months across the property industry, a sustained and stable market is something we are all eager to see.

By Peter Joseph

Source: Mortgage Introducer

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Confidence in property market goes up despite end of Stamp Duty holiday

UK buyers are increasingly becoming more positive when it comes to the property market, despite the Stamp Duty holiday coming to an end at the end of last month.

Data from OnTheMarket’s property sentiment index revealed that, within the next three months, 74 per cent of active UK buyers firmly believed they would buy a property while 81 per cent trusted they would manage to sell.

“I said in last months’ property sentiment index that this is the best market in which to sell in two decades – potentially longer – and looking at the data for September, I’d stand by that statement,” said OnTheMarket’s chief executive Jason Tebb.

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The number of properties that went under offer in within 30 days saw an 11 per cent increase in the last year, going from 44 to 55 per cent year-on-year.

“This all points to the fact that serious property seekers still have a lot of confidence in their search,” said Tebb.

Buyers haven’t lost their faith in the market, despite the end of tax breaks.

The Stamp Duty holiday was introduced by the UK Government in June 2020 to help those affected by the pandemic, allowing buyers to avoid paying the tax on the first £500,000 of a property purchase.

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The break – which was extended until the end of September – was not mentioned in yesterday’s Budget, leading many to believe the Chancellor will not further extend it.

On the lettings’ side, the housebuilding market’s crisis has created “a perfect storm” where agents see properties for rent go to sealed bids and prices rise in many parts of the UK.

“This is the result of a perfect storm of home movers taking advantage of the current buoyant market and selling their to ‘go into rented’ to break a chain and put themselves in a better position when they do find the right property,” he said.

“This, together with many landlords also taking advantage of the current market and ‘cashing out’, is reducing available lettings stock, adding further to the usual levels of tenant demand and therefore compounding the shortage in the private rented sector.”

By Ilaria Grasso Macola

Source: City AM

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Search Acumen: Property market levelling out

The property market has begun to level out compared with the start of the year, but remains incredibly active, according to Andy Sommerville, director at Search Acumen.

He added that demand is still strong, and that Search Acumen expects it to fuel activity in the property market well into Autumn and beyond.

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The latest UK monthly property transactions data showed that the provisional seasonally adjusted estimate of UK residential transactions in September 2021 was 160,950, 68.4% higher than September 2020 and 67.5% higher than August 2021.

Sommerville said: “These latest figures reflect the ambition of homeowners to get property transactions over the line whilst the stamp duty financial incentive still stood.”

He added that first-time buyers, families and those looking for properties outside cities have carried the weight of the market and have taken the most benefit from the stamp duty holiday.

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Somerville said: “Throughout the year, many lawyers have embraced digital ways of working in order to deliver efficiencies to the transaction processes and avoid burnout.

“Given the foreseeable levels of high demand, a long-term and sector-wide shift towards digitisation is needed if we are to accommodate speedier transactions and improve services to buyers in the long run.”

By Jake Carter

Source: Mortgage Introducer

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Did the Stamp Duty Holiday Ignite a BTL Fever?

Despite the reduction in stamp duty bills, there is little sign that the stamp duty holiday led to large numbers of new investors purchasing buy-to-lets.

At their peak this year, investors purchased 14 per cent of homes sold across Great Britain in February, the month before the original end of the stamp duty holiday. However, over the entire course of the 15-month tax-break investors purchased 12 per cent of homes sold in Great Britain. This is marginally up from an average of 11 per cent during the 12 months before the holiday, but far from the 17 per cent recorded in Q4 2015 – the run up to the introduction of the 3 per cent stamp duty surcharge on 1 April 2016.

This means there were a total of 215,000 investor purchases across Great Britain between July 2020 and September 2021. While this figure is up from 164,300 during the equivalent period in 2018 and 2019, more transactions have taken place by other buyer types. Both these numbers remain below the 242,400 purchases which were made during the 15-month run up to the introduction of the 3 per cent stamp duty surcharge on 1 April 2016.

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Over the course of the15-month stamp duty holiday, the average buy-to-let investor’s tax bill fell by 35 per cent – from £8,500 in the month before the holiday, to an average of £5,500 between July 2020 and September 2021. For the average investor, this equates to almost three months’ rent.

The average bill came to £5,300 during the first 12 months of the holiday when investors paid the 3 per cent stamp duty surcharge on the first £500,000 of any purchase. It then rose 17 per cent to £6,200 when the threshold fell to £250,000 between July and September 2021. Average bills are set to return to around £8,400 from 1 October 2021, just below what investors were paying on the eve of the stamp duty holiday.

Overall, the holiday meant that the average investor paid less in stamp duty than at any time since April 2016, when the 3 per cent stamp duty surcharge was introduced. Despite this, the average bill during the holiday remained twice the level it was before the surcharge was introduced. This is partly why there hasn’t been as much of an increase in investor purchases this time around.

There is little indication that investors used their savings from the holiday to buy bigger properties in more expensive areas. Instead, 83 per cent of investor purchases were under £250,000, meaning their savings from the holiday were significantly smaller than those enjoyed by home movers. It also means that investors have been less sensitive to the change in the nil-rate stamp duty threshold since they tend to buy cheaper properties.

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During the holiday the average price paid by a landlord rose by just 1 per cent to £181,000, despite house price growth of 10 per cent over the same period. This suggests landlords were happy to pocket the tax saving rather than use it to buy a property which would generate more rent.

RENTAL GROWTH

Average rental growth across Great Britain hit 8.0 per cent in September, the third fastest annual rate of growth recorded this year. Nationally, regions in the South of England have continued to drive rental growth. The average rent on a new home rose 14.8 per cent in the South West, 14.7 per cent in the South East and 10.8 per cent in the East of England. September marked the sixth consecutive month where annual rental growth hit double figures in the South West.

London rents have also continued to recover. Although Inner London rents fell for the twentieth consecutive month, the 4.4 per cent annual fall was the smallest decline this year, and smaller than the 22.1 per cent decrease recorded in April when the market bottomed out. In Outer London, rents grew 3.2 per cent annually in September, rising for the thirteenth consecutive month. This kept Greater London rents overall in positive territory, up 1.8 per cent year-on-year.

Source: Property Wire

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Property market now standing on own two feet

Any fears of a property market collapse following the stamp duty holiday can now be put to bed, according to Marc von Grundherr, director of Benham and Reeves.

The Halifax House Price Index revealed that UK house prices rose by 1.7% in September, equating to an increase of £4,400 to the value of the average property.

This means that UK house prices are now at a record high of £267,500.

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von Grundherr said: “The stamp duty holiday clock has now well and truly expired and those to have seen a last gasp saving would have entered the market many months ago in order to complete in time.

“Of course, such heightened levels of market activity may inevitably bring a slight cooling in the rate of house price growth, but that’s to be expected.”

Looking to the London market, von Grundherr explained that it has been waiting patiently in the shadows watching high levels of activity play out across the rest of the UK.

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The higher price of property has long seen many London homebuyers disregard the importance of the stamp duty holiday, particularly since the price threshold was reduced, he revealed.

von Grundherr said: “However, we’ve seen a far more natural level of momentum building across the market and this looks set to snowball during the autumn and winter months.

“As a result, our money is on London to finish the year with the most impressive performance where house price growth is concerned.”

By Jake Carter

Source: Mortgage Introducer

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Rightmove: Total savings from stamp duty holiday estimated at £6.1bn

The total savings people have made by purchasing properties during the stamp duty holiday has been estimated at £6.1bn, according to data collected by Rightmove.

With the tax holiday drawing to a close, Rightmove has estimated that one million households benefitted from a stamp duty saving since the incentive was introduced in July 2020.

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As well as this, buyer demand in England is 43% higher than in September 2019.

Meanwhile, HMRC has revealed that stamp duty receipts have continued to decline.

Tim Bannister, property expert at Rightmove, said: “Around a million households made tax savings since last July, which provided some people with an added incentive to move, especially in the higher price brackets.

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“We’re still seeing much higher levels of demand for homes than in 2019 so it’s clear there have been a number of other reasons for making this summer the time to move to a new home.

“There are still savings to be had for first time buyers, so this hasn’t signalled the end of savings altogether and we’re expecting the market to stay busy for the rest of the year and into next year.”

By Jake Carter

Source: Mortgage Introducer

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Stamp duty holiday generates 140,000 ‘extra’ transactions

The stamp duty holiday has generated 140,000 “extra” transactions in the UK mortgage market but contributed a meagre 0.1 per cent of GDP, according to a report.

In its report, ‘Lessons From The Stamp Duty Holiday’, the London School of Economics said thousands of homebuyers had been helped by the tax break but when it came to consumption the effect was not as great.

LSE distinguished policy fellow Kath Scanlon told FTAdviser in an online briefing: “I dare say there were other tax changes one could have made which would have stimulated more consumption.”

The holiday enabled first-time buyers to avoid stamp duty land tax on up to £500,000 of a house purchase between July 2020 and June 2021. On average, it saved individual buyers £15,000, according to the report.

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The government introduced the tax holiday to stimulate the housing market and to increase expenditure on goods and services relating to housing transactions.

But LSE found the “extra” 140,000 transactions, which it defined as “transactions which would not have taken place without the holiday”, sparked expenses of an average of £16,000 per transaction.

This totalled around £2.2bn, though LSE clarified in its report that this figure could sit anywhere between £1.8 to £2.7bn, “given the very large uncertainties around these figures”.

With the UK gross domestic product totalling £1.96trn in 2020, this means the stamp duty holiday expenditure contributed just a fraction, 0.1 per cent, to countrywide spending.

The biggest values in the stamp duty holiday expenditure total came from bathroom and kitchen renovations. Followed by gas rewiring, and then furniture.

LSE’s report added these values to the pre-sale improvements sellers made prior to putting their property on the market to attract buyers to calculate final expenditure.

For the economy as a whole, Scanlon said the stamp duty tax holiday probably wasn’t “so much” worthwhile due to the spike in house prices, compared to how worthwhile it was for the industry and its employers.

“But this [the stamp duty tax holiday] was chartered at the housing market specifically and it seems to have been successful.”

When the holiday came into force, house prices began to climb, enjoying eight months of uninterrupted growth.

According to the Office of National Statistics’ (ONS) latest house price index, UK average house prices have increased by 10 per cent over the year to May 2021.

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Scanlon said it would be interesting to compare the stamp duty holiday with the government’s Eat Out to Help Out scheme.

Whilst the LSE report did not explore this, Barclaycard figures showed the latter scheme prompted a 34 per cent jump in spending on dining out. The Treasury estimated the average claim was about £5 during the scheme’s tenure, totalling to an estimated 80m claims which cost it £400m.

Other contributing factors LSE cited in its report for the rise in house prices, alongside stamp duty tax, included the pandemic induced shift to rural areas with more space.

“The tax holiday was not wholly responsible for house price rise,” said Scanlon. “Consumer behaviours [due to the pandemic] really reshaped the housing market. Though we still don’t know if this is temporary, or here to stay.”

By Ruby Hinchliffe

Source: FT Adviser

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Stamp duty holiday sees 22% rise in monthly property transactions

The Stamp Duty Land Tax (SDLT) holiday has delivered market stimulus that has far outweighed the immediate response to the 2007/08 financial crisis, according to analysis by Search Acumen.

And the current SDLT relaxation has so far triggered a 7% rise in house prices from June 2020 to February 2021, adding £17,265 to the price of the average home in England.

This rise has more than offset the £2,572 SDLT savings made on the average property.

On average 103,724 residential property transactions have occurred each month across England and Northern Ireland since the tax break was introduced, up 22% from the 84,691 average in the 12 months to March 2020.

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Since the measure was introduced, 171,303 extra deals have taken place compared to the pre-COVID period in 2019/20.

Search Acumen’s analysis showed the SDLT holiday of 2008/09 in the wake of the Great Financial Crisis saw an average of 60,048 transactions per month. This was down 27% from the previous 12-month average of 82,378 monthly residential property transactions.

Higher transaction volumes during the current holiday could be partly attributed to lending conditions being more favourable than in the aftermath of the financial crisis.

Strong credit availability has helped property transactions progress despite pandemic-induced disruption to the economy, with the tightening of credit mainly concentrated in the high loan-to-value (LTV) segment of the mortgage market.

Andy Sommerville, director at Search Acumen, said: “This analysis suggests the property market has been far more responsive to intervention compared to the post-financial crisis holiday.

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“The housing market’s strong performance compared to the wider economy highlights the contrast between the current healthcare crisis and its economic impacts, and the 2008/09 crisis which was rooted in financial markets.

“While many households have absorbed income hits and face greater job insecurity, the UK’s financial system has held up reasonably well since the onset of COVID. Lenders did pull back from the mortgage market in the early stages of the pandemic, but the flow of credit has gradually picked up as banks got to grips with the crisis.

“As a result, financing for house purchases has been in reasonably good supply and worked in tandem with the SDLT holiday to generate a level of activity not seen for a decade³, despite the unprecedented challenges of COVID-19.

“However, giving extra support for buyers has had many challenging consequences, from pushing up house prices and negating the average saving to heaping a heavy workload on time-pressured conveyancers.

“Property lawyers have been working around the clock to get people into their homes before the initial 31 March cut off. The conveyancing workload is unlikely to get any lighter given the holiday is now running until June and tapering through to September.

“In the long-term, the industry needs to put conveyancing capacity – not to mention mental wellbeing – at the top of the agenda given the pressure law firms have been under to ensure clients complete on time.

“It is clear the traditional way of performing due diligence on transactions is getting in the way of efficiency, and we need to pivot quickly to digital, data-led solutions that can improve the experience for homebuyers and their advisers.”

Source: Mortgage Introducer

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Is Ending the Stamp Duty Holiday Good for Property Market?

Introducing a stamp duty holiday at the height of the pandemic was commendable but it has over-stayed its welcome, says Tom Bill, Head of UK Residential research at Knight Frank.

With the benefit of hindsight, the stamp duty holiday was unnecessary. The Chancellor was right to introduce it last July but the notion it is needed to support the country’s economic recovery has not rung true for many months – which is a welcome development.

Would activity in the housing market have been as strong over the last year without the holiday? It is doubtful but we would still be talking about a remarkable year compared to initial expectations.

The general election of December 2019 was the catalyst for the release of frustrated demand that had built during five years of Brexit-induced political uncertainty. While Covid initially put this recovery on hold, it was subsequently amplified as people reassessed their homes during successive lockdowns. Then along came the stamp duty holiday.

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Its merits as a way of stimulating wider economic activity are clear but the decision to extend the holiday by six months beyond the original March 2021 deadline is more open to debate.

However, if we remember back to the Budget, which took place on 3 March, it was a time of some uncertainty. Schools had not yet re-opened, less than a third of the UK population had received their first vaccination and a stamp duty holiday had been a welcome boost for those that most needed it.

The introduction of a taper was arguably more significant than the extension. It showed the government had listened to concerns about pressures on the conveyancing system and meant it avoided newspaper headlines about buyers missing the deadline through no fault of their own.

However, in hindsight, a three-month extension and a three-month taper was possibly excessive.

UK house price growth was still only in single digits at this stage but it had been above 5% for seven months and the holiday was already distorting sales patterns.

March was a record month for transactions in the UK and over the year more money was spent in the housing market than since before the global financial crisis. Predictably, sales volumes dropped sharply in April in a similar way to 2016 after the implementation of a 3% stamp duty surcharge for second home-owners.

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It has made the true state of the market difficult to assess. It is the equivalent of looking in the mirror at the funfair – you can make out the overall shape but little of the meaningful detail.

However, the stamp duty holiday hasn’t just squeezed transactions into artificially short periods of time, it has also put people off entering the market.

A tax deadline there is no guarantee of meeting, together with stories of sealed bids, over-worked conveyancing solicitors and a shortage of removals vans will have deterred some – exacerbating already-low levels of supply and putting upwards pressure on prices.

Supply did not pick up after Christmas this year in the way it normally does, due to uncertainty over new variants and the fact many families were home-schooling. Ambiguity over missing the original March stamp duty holiday deadline was just another reason not to list your property.

Market appraisals are a leading indicator of new supply and normally build during the first quarter of the year. In the ten years between 2009 and 2019, the number of appraisals only fell once between February and March. That was in 2016, ahead of the introduction of a 3% stamp duty surcharge in April.

This hesitation on the part of sellers highlights how people crave stability. That is true irrespective of any wider debate about the flaws of a transaction-based tax.

In a similar way to rising interest rates, there will be a financial hit from ending the holiday but the wider point is that it signals a return to normality.

Indeed, the second half of this year should see healthy levels of activity in the UK housing market. There is frustrated demand in the system, new supply is starting to pick up and the labour market is stronger than most economists predicted six months ago.

Almost a year after its introduction, there is no sense the Chancellor was wrong to introduce the stamp duty holiday but there is a strong feeling that it has, thankfully, over-stayed its welcome.

BY PETE CARVILL

Source: Property Wire

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