Property sales tumble after stamp duty holiday deadline

Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on the publication of the HMRC Monthly Property Sales for July, which shows property sales tumble after stamp duty holiday deadline.

Key findings from the report:

• Property sales fellto 82,110 in July – down 61.5% from a record 213,120 in June (not seasonally adjusted).
• It’s 1.8% higher than a year earlier, but lower than we usually see in July.
• Sales were always going to be significantly lower the month after the stamp duty holiday tapered, because people had brought their purchases forward to take advantage of the tax break.
• It demonstrates the powerful psychological impact of the stamp duty holiday, even in those cases where there was little tax to be saved.

Sarah Coles comments:

“Property sales tumbled almost two thirds in July, after the stamp duty holiday deadline passed. It demonstrates the powerful psychological impact the tax break had, which went way beyond the actual cash buyers could save.

“Property sales had climbed quickly from record lows when the market reopened in May 2020, but growth had tapered off by the time the stamp duty holiday was announced that July. From that point on, as sales filtered through, they started climbing way above their usual levels, to reach record highs in the month before the tax break tapered.

“The stamp duty holiday didn’t create demand from nowhere. There was already a crowd of people ready to buy because of changes in how we wanted to live, and pent-up demand from the closure of the market during the first lockdown. The tax break just opened a window of eight months, through which this crowd of people tried to squeeze. Eventually this was extended and tapered, but it kept the pressure up. 

“It meant a bulge in property sales, and the fact there were fewer sellers than buyers at a time of such massive demand, pushed prices through the roof. 

“In June, prices had risen an average of £31,000 in a year. Given the maximum stamp duty saving possible was £15,000, in most cases people ended up paying far more than if they’d bought before the pandemic. However, the fact prices shot up so quickly that it wiped out any potential tax saving demonstrates not that the stamp duty holiday was irrelevant, but that the psychological impact it had went way beyond the practical financial difference it made to any transaction.

“All eyes will be on what happens next to the market, as this psychological boost is removed. Sales have fallen, and price rises are showing signs of slowing. There’s the chance that as the panicked rush subsides, prices will weaken. However, underlying demand from people who want to change their lifestyle, boosted by extraordinarily low mortgage interest rates, isn’t going anywhere in a hurry. It means there’s every chance of a soft landing as we head into the autumn.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay