The impact of the stamp duty land tax holiday (SDLT) has been substantial in stimulating both demand and supply of homes in the UK housing market. Established in June 2020, the tax relief for home buyers stimulated increased transactions and property investment, serving as a key pillar of the UK economy through the pandemic period. As it tapers out, and the economy recovers quickly, innovative measures are supporting the growth and expansion of the housing maket.
It is estimated that the SDLT generated an extra 103,724 monthly property transactions across England and Northern Ireland since the first nationwide lockdown. An average of 84,691 transactions were recorded in the year leading up to March 2020, hence this 22 per cent boost to transaction activity was pivotal. For instance, 31,300 more transactions in homes priced above £500,000 and in homes priced above £1 million occurred in 2020-2021 when compared to 2019-2020; the most for this bracket in 13 years.
The government has now begun to withdraw pandemic stimulus packages such as furlough and SDLT given UK economic growth acceleration being the second fastest in the G7 countries. Expanding output, positive employment growth and wage hikes as well as the anticipated interest rate rise in 2022 substantiate this move to normalise a housing market characterised by a significant demand to supply imbalance.
Despite SDLT tapering out from June to September 2021, a sustainable upwards trend has remained with homes selling in 27 days on average in July, down from 42 days in July 2016. This narrowing gap in the average time between listing and sale subject to contract is predicated on higher levels of investment and supply in key central zones and locations such as London.
The number of energy performance certificates, a useful up-to-date proxy for housing delivery, rose 11 per cent in the second quarter of 2021 relative to the same period in 2020. At 40,717 certificates registered the emerging effect of innovative new measures such as the mortgage guarantee scheme are increasingly evident. Meanwhile long standing measures such as the Help to Buy scheme offer stable medium term stability to market demand.
Economic research firm Capital Economics’ housing market outlook said “robust demand” for would limit any sharp drop in transactions in Q4 once the tax break goes .