Headline figures are in and house buyers saved on average £15,000 during the stamp duty holiday. 90% of transactions came in under the £500,000 ceiling for house purchases, showing that there was lots of movement in this area of the market.
In the first quarter of 2021, there was a 50% increase in house purchases compared to the same period in the previous year. This means that during the stamp duty holiday there were an estimated additional 140,000 transactions.
The holiday was introduced in July 2020 and by September the rise in transactions became apparent. From September 2020 to January 2021 the difference in transactions was about 10,000 extra per month, totalling 40,000. The final few months of the stamp duty holiday saw around 100,000 transactions due to people rushing to complete them before the end of the holiday.
How does this benefit the economy?
The stamp duty holiday increased house purchases, which meant more staff were needed to cater to the rising demand of the conveyancing process. This created job opportunities in the legal sector and also in many others like the financial sector.
As a result of the stamp duty holiday and more people moving, more money was circulated into the economy by people spending on renovating and decorating their new houses.
To break it down further:
The average spend on a move (solicitors, removals, fees) £6,000
Estimated spend on cosmetic improvements and renovations: £10,000- £20,000
By using the lower end of the scale it would create an additional expenditure of a total of £2.2 billion
(140,000 extra transactions x avg £16,000 on moving and cosmetics)
Studies showed the 3 main reasons why people moved
- Easing of lockdown: this had already delayed many people in moving and buying houses
- Changing requirements from the home: because people were working from home or needed space to. People were moving out of the cities and wanted more outdoor space
- Stamp duty holiday: making it easier and cheaper to move and changed people’s opinions to moving because this cost was removed
Is stamp duty a warranted tax?
People believe that stamp duty isn’t a warranted tax, and it can be avoided by simply not moving. This does have knock-on effects.
- It reduces the mobility of people: meaning housing stock isn’t used effectively
- Reduces the incentive for older people to downsize, because they’re paying extra for less
- Growing younger families don’t have access to the bigger houses owned by older people and empty nesters
- Productivity is reduced as people are less willing to move to get a better job elsewhere
- The extra costs mean a lower level of moving and therefore less economic activity
Increase in house prices
It’s important to note that the average house price rose by 10% in England in March 2021, compared to 3% in the previous year.
Increases in house prices are not the same as amounts saved by stamp duty holiday, so there are also factors to consider which are increasing house prices. If you would like more information on purchasing or selling your home, please contact info@beestonshenton.co.uk
Resources used:
LSE Report: Lessons from the Stamp Duty Holiday
Gov.uk Report: UK Stamp Tax statistics 2020 to 2021 – Commentary
