The stamp duty holiday first began in July 2020. It was a government scheme designed to boost the property market and entice people to buy a new home, despite the finances of many people being affected by the COVID-19 pandemic.
The stamp duty holiday offered buyers a saving of up to £15,000 in costs, providing a huge incentive for moving home. Of course, it still remains important to ensure your finances are in order before proceeding due to the significant expenses that come with the process.
Still, with the potential savings came a surge in house sales in the UK. The market spiked and it is estimated that 1.3 million buyers have benefited from the holiday across Great Britain.
However, this sudden spike in houses sales had a knock-on effect on average house prices across the UK. As the demand for housing increased so did asking prices, and the stamp duty holiday savings simply counteracted this price surge. Therefore, the potential to save money was reduced.
The 30th of June marked the last day people could make significant savings thanks to the stamp duty holiday, while a reduced tax break will continue to help buyers in the coming months.
It has been predicted that house prices will begin to reduce again as the market recovers from the effects of the pandemic. But what does this mean for first-time buyers?
The impact of the pandemic, stamp duty holiday, and surging house prices left first-time buyers at a disadvantage. However, the surge in house prices because of the stamp duty holiday is mainly to blame. As a result of this significant price increase, first-time buyers struggle to fund their first purchase as the money they initially saved up won’t cover their new moving costs.
As stamp duty was not applicable for first-time buyers in England and Northern Ireland on homes costing up to £300,000, the changes didn’t help people get on the property ladder. It has actually become more damaging, as they now have increased house prices to contend with.
First-time buyers have been negatively affected by these changes. Once house prices begin to fall, more people should be able to make their first home purchase.
Rather than immediately returning stamp duty to its pre-pandemic rates, the 1st of July to the 30th of September was designated as a transition period. From 1st October, the rates will be back to normal.