Since the implementation of the ‘Stamp Duty Holiday’ in July 2020, the market has seen a 22% rise in monthly property transactions with the rise equivalent to over 171,000 extra sales, data from Search Acumen has shown.
We explore what the data shows, what it means for the housing market now and what this has taught us for the future.
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What does the data show?
Across England and Northern Ireland, there has been an average of 103,724 residential property transactions each month since the stamp duty holiday was introduced in July 2020. This is up 22% from the 84,691 average in the 12 months leading to March 2020, when the housing market was fully shut down.
As a result of these extra sales, there has been a 7% increase in house prices from June 2020 to February 2021, adding £17,265 to the price of the average home in England.
This response has far exceeded that of the response to the 07/08 financial crisis, with Search Acumen’s analysis showing the stamp duty holiday in the wake of the financial crisis only saw an average of 60,048 property transactions per month. This number of property transactions meant they were actually down 27% from the previous 12-month average of 82,378.
The impact on average property prices during the two SDLT holidays has also differed significantly, with the current stamp duty holiday seeing house prices in England jump 7% from £251,0264 to £268,291. The SDLT holiday of 08/09 saw house prices in England fall of 2% from £177,232 in August 2008 to £174,136 in December 2009.
Why is this happening?
Although it would be easy to assume the increased transactions is purely down to the stamp duty holiday being put in place, further analysis would suggest it’s not due to this exclusively.
The higher property transactions could also be explained by the more favourable lending conditions when compared to that of the financial crisis. Prospective buyers have been able to access fairly cheap medium and low loan to value mortgages to help finance home purchases.
This is in contrast to the lending conditions after the financial crisis, where potential home buyers were suffering with lenders drawing back from the mortgage market.
What has this taught us for the future?
Andy Sommerville, director at Search Acumen, says: “This analysis suggests the property market has been far more responsive to intervention compared to the post-financial crisis holiday.
“The housing market’s strong performance compared to the wider economy highlights the contrast between the current healthcare crisis and its economic impacts, and the 2008/09 crisis which was rooted in financial markets.
“While many households have absorbed income hits and face greater job insecurity, the UK’s financial system has held up reasonably well since the onset of Covid. Lenders did pull back from the mortgage market in the early stages of the pandemic, but the flow of credit has gradually picked up as banks got to grips with the crisis.
“As a result, financing for house purchases has been in reasonably good supply and worked in tandem with the SDLT holiday to generate a level of activity not seen for a decade, despite the unprecedented challenges of Covid-19. However, giving extra support for buyers has had many challenging consequences, from pushing up house prices and negating the average saving to heaping a heavy workload on time-pressured conveyancers.
“Property lawyers have been working around the clock to get people into their homes before the initial 31 March cut off. The conveyancing workload is unlikely to get any lighter given the holiday is now running until June and tapering through to September.
“In the long term, the industry needs to put conveyancing capacity – not to mention mental wellbeing – at the top of the agenda given the pressure law firms have been under to ensure clients complete on time. It is clear the traditional way of performing due diligence on transactions is getting in the way of efficiency, and we need to pivot quickly to digital, data-led solutions that can improve the experience for homebuyers and their advisers.”
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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. Read more about Millie here.
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