Will We See A Slow In House Prices After The Stamp Duty Holiday?

house prices

With the deadline for the Stamp Duty holiday looming, speculation turns to what will happen to house prices. Are they going to drop? Will they stay the same, or maybe even go up? Is demand in the housing market going to fall?

The ‘Stamp Duty Holiday’ was introduced on 8th July 2020, where the Chancellor, Rishi Sunak, announced that the threshold on who must pay Stamp Duty will be raised to £500,000 and so anyone buying a house under this price will not have to pay any Stamp Duty. This ‘holiday’ is only a temporary relief, lasting until 31st March 2021, with the intention to boost the property market which had seen house prices fall for four consecutive months.

According to Nationwide, the growth on property prices in January 2021 was at 6.4%, which has slowed compared to December 2020, where growth was at 7.3%. The slow-down in property price growth has people concerned that this is a sign of what’s to come…

However, the slow in growth could be explained by a fall in demand. The Stamp Duty holiday has been in place for almost 7 months, and it could be argued anyone who wanted to move or were thinking about moving has bought a house and moved in this time. This means there’s now less people wanting to move to a new house.

As a result of this, there will be less demand for houses, as well as less supply. Less demand and supply in a market leads to a drop in prices, explaining why the growth has slowed.

It could also be argued the Stamp Duty holiday has resulted in prices inflating so much that they’re above what the houses are really worth, meaning if prices are to fall this may only fall to be in line with their ‘true’ value.

There is also current speculation over whether the Stamp Duty holiday will be extended, which we will have the wait until Rishi Sunak’s budget on 3rd March to see if he announces an extension of the relief.

Whether there’s a Stamp Duty holiday or not, there will always be a housing market. There was a housing market before the Stamp Duty relief and there will be one after. Undoubtedly the relief has spurred people into action, potentially bringing forward their plans of moving, but there will still be people wanting to move after the Stamp Duty holiday.

There may be an initial drop in demand and supply, causing a potential slight dip in house price growth, but this isn’t to say house prices are going to drop significantly – they may just plateau until demand ultimately spikes again.

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Millie is a perfectionist with a passion for property and writing articles. You’ll find her researching the latest housing trends and the newest up and coming areas worth investing in.

About Millie Archer 33 Articles
Millie is a perfectionist with a passion for property and writing articles. You'll find her researching the latest housing trends and the newest up and coming areas worth investing in.

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