After the first coronaviruses lockdown last year, the stamp duty holiday for home buyers in England was set to be a 6.4 billion tax break, with roughly half of the savings benefiting those who bought properties over 500,000, according to an analysis by property agent Savills.
The tax revenues from the measure have been hit by the figure, based on an analysis of official data. It was introduced by Rishi Sunak, the chancellor, in July last year to boost the housing market after the pandemic restrictions were lifted.
Given the level of pent-up demand at the time, property experts questioned whether the stimulus was necessary.
Lucian Cook, Savills head of residential research, said it was not entirely clear how much the stamp duty holiday has affected buyer behaviour, given low interest rates. The epidemic had triggered a shift from urban to rural living.
He said that the holiday was one of the catalysts but fundamentally the fuel was a reassessment of housing needs and the low cost of debt was the main reason for the low cost of debt. I think they the Treasury will look back on it and realise that it has been a generous tax break at a time when the market is quite strong. The stamp duty holiday had no impact on buyer behaviour, according to Henry Pryor, an independent buying agent. There was no decision to buy or buy a different kind of home because of the stamp duty holiday. He said that demand had remained strong after the holiday ended. He said the big losers had been first-time buyers who had encountered intense competition where they had previously enjoyed a special stamp duty tax break of their own.
In the period from June 2020 to September this year, there were 1.58 m transactions, up more than a fifth over the equivalent pre-pandemic 15 month period from June 2018, according to Savills analysis of the official quarterly data. Sales of homes between 500,000 and 1 m were up by 71 per cent, while 1 m-plus transactions increased by 75 per cent.
The two-stage tax break was initially applied on the first 500,000 of any home purchase, giving a maximum savings of 15,000. The tax-free limit was halved to 250,000 at the end of June this year and came to an end in October.
Stamp duty receipts for the 15 month holiday were down just 1 bn at 9.6 bn, compared to the equivalent pre-pandemic period in 2018 -- 19, according to Savills.
Cook said that the tax take was boosted by the big jump in sales in the 1 m-plus bracket. The Treasury received 5 billion in stamp duty receipts after the holiday period was changed over by just over 42,000 properties for more than 1 million dollars.
Stamp duty rates are applied in five value bands. The rate is 10 per cent on any portion of the transaction between 925,000 and 1.5 m, rising to 12 per cent on any part of a purchase over 1.5 m.
The Treasury said that the temporary stamp duty cut has helped protect hundreds of thousands of jobs that depend on the property market by stimulating economic activity. The Office for National Statistics said that house prices increased 13.2 per cent over the year to June 2021, the highest annual growth rate since November 2004. The average house price in June was 266,000, up 31,000 on the same month a year ago.