The UK property market has been facing a boom in recent months. But what does this mean with the stamp duty holiday deadline looming?
Since Chancellor Rishi Sunak announced the extension to the stamp duty holiday back in March, the UK property market built up strong momentum. This momentum continued into April and May as buyer demand and house price growth have been on the rise.
With this strong demand, many homebuyers and property investors are hoping to complete before the stamp duty holiday deadline. The nil-rate band is set for properties up to the value of £500,000 until 30th June. However, as this date nears, it will become apparent that some transactions won’t complete in time. And there are disparities depending on location.
Buyer demand has remained robust across the UK property market. In April 2021, there were 20% more applicants registering to buy a home than those in April 2019, according to London estate agency Hamptons. Supply has still remained low. Currently, 13% fewer new homes are coming to the market than in April 2019. The number of homes for sale is at a six-year low.
This lack of stock has led to a record 41% of homes sold in April 2021 to receive offers from three or more buyers. Additionally, a record share of properties has sold before even being listed on a property portal.
The strong demand has led to house price growth across the UK property market. According to Rightmove’s House Price Index, the average price of property coming to the market has increased by 1.8% this month. This equates to a £5,767 rise to £333,564. This is a new national record and above the previous all-time high recorded last month.
Tim Bannister, director of property data at Rightmove, says: “Last year’s unexpected mini-boom is rolling on into 2021, with new price and market activity records again defying many predictions.
“In another twist, it is the regions of Britain further north that are leading the way, with some degree of catching up between average prices in London and the north. While the gap remains very large, with average prices in London still 2.9 times higher than those in the north, this ratio is now at its smallest since 2013.”
The north of England in particular is home to a greater imbalance between supply and demand. This is causing the region to see some of the strongest house price growth. House prices in the north-west have increased by 11.1% from March 2020 to May 2021. Yorkshire and the Humber followed closely behind with a 10.5% rise. London has lagged behind with only 0.2% growth.
With property market activity at such strong levels, property transactions are taking longer than usual. And this is putting pressure on many professionals in the industry. The risk of some property sales not completing by the stamp duty holiday deadline is increasing.
Recent research by online mortgage broker Mojo Mortgages has revealed the average conveyancing times across the country. This typically largely depends on the time it takes for local authority searches to be returned. This can vary drastically across local authorities.
In Ashfield District Council, it takes an average of only five working days for searches to be returned. This means conveyancing takes an average of only 10 weeks there. Hackney Council is taking the longest to return searches with an average of 180 days. This drags out the conveyancing process, which takes an average of 45 weeks there.
Richard Hayes, CEO of Mojo Mortgages, explains: “The Stamp Duty holiday, and the savings of up to £15,000 that come with it, has helped thousands of people buy new homes.
“Although these times are average and theoretical, they do help people realise how long things can take, and how tight it could be… Of course, there is definitely the flip side of the coin where mortgages and conveyancing can get sorted much quicker than you expect.”
Spotlight on the north
The tapering period of the stamp duty holiday will be in place between 1st July and 30th September. At this point, the nil-rate band will be in place for properties worth up to the value of £250,000. This means if a buyer misses the deadline at the end of June, they could still make some stamp duty savings. However, some buyers could lose out on thousands of pounds of tax savings if their property transaction doesn’t complete by 30th June.
Buyers in the north of England are expected to be less impacted by the lowering of the nil-rate band. The region is home to more properties below £250,000. This will likely cause demand and house prices to continue rising there in the coming months.
David Darlington, partner at solicitors Fieldings Porter, adds: “When it comes to the upcoming June Stamp Duty deadline, I do think that for some regions of the UK such as the north west and north east it will be less important than the one in October when it reverts to £125,000 as the property prices are lower with lots of properties under the £250k mark.”