The stamp duty holiday introduced after the first coronavirus confinement last year provided a tax benefit of £ 6.4 billion for home buyers in England, with about half of the savings benefiting those who bought properties over £ 500,000, according to an analysis by real estate agent Savills.
The figure, based on an analysis of official data, underlines the extent of the tax revenue hit from the measure. It was introduced in July last year by Chancellor Rishi Sunak boost the housing market after the pandemic restrictions were lifted.
But real estate experts questioned whether the stimulus was necessary, given the level of pent-up demand at the time.
Lucian Cook, Savills’ head of residential research, said it was not “entirely clear” how much the stamp duty holiday influences buyer behavior, given low interest rates. The pandemic also caused a move from urban to rural life.
“I suspect the holiday was one of the catalysts, but fundamentally the fuel was a reassessment of housing needs and the oxygen for the market was the low cost of debt,” he said. “I think they [the Treasury] will look back and realize it was quite a generous tax increase at a time when the market is quite strong. ”
Henry Pryor, an independent buying agent, said the stamp duty holiday had no impact on buyer behavior. “No one made the decision to buy or was motivated to buy another type of house because of the stamp duty holiday.”
This view was confirmed, he added, because demand remained strong after the holiday ended. He said the big losers were first-time buyers, who faced intense competition where they had previously enjoyed a specific stamp duty tax reduction of their own.
Savills’ analysis of the official quarterly data found there were 1.58 million transactions in the period from June 2020 to September this year, more than a fifth more than the equivalent pre-pandemic period of 15 months from June 2018. Home sales worth between £ 500 000 and £ 1 million increased by 71 per cent, while transactions increased by £ 1 million plus 75 per cent.
The two-stage tax break initially applied to the first £ 500,000 of any home purchase, offering a maximum saving 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.
While the £ 6.4bn lost revenue for the Treasury, stamp duty receipts over the 15-month holiday were just £ 1bn lower to £ 9.6bn, compared to the equivalent pre-pandemic period in 2018-19, according to Savills.
Cook said tax spending during the holidays was boosted by the big jump in the share of sales in the £ 1m-plus group. The analysis found that just under 42,000 properties changed owners during the holiday period for more than £ 1 million, earning the treasury £ 5 billion worth of stamp duty receipts.
Normal stamp duty rates are applied in five value bands. At the top, the rate is 10 per cent on any part of the deal between £ 925 000 and £ 1.5 million, rising to 12 per cent on any part of a purchase of more than £ 1.5 million. The top two tires remained unchanged during the holidays.
The treasury said: “Our temporary stamp duty reduction has helped protect hundreds of thousands of jobs that rely on the real estate market by stimulating economic activity.”
House prices jumped 13.2 per cent over the year to June 2021, according to the Office for National Statistics – the highest annual UK growth rate since November 2004. The average house price in June was £ 266 000, £ 31 000 higher than the same month per year earlier.