Vast majority of FTBs priced out of stamp duty holiday savings as lockdown sees house prices surge

Property Reporter
23rd February 2021
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The race to take advantage of the stamp duty holiday has its odds stacked against the vast majority of participants, with only first-time buyers in London and the South East saving money, according to new research.

Newly released data from Halifax has shown that home movers are making an average saving of £11,566 during the stamp duty holiday. However, average house prices have risen by £57,790 during the same period, from £373,537 to £431,327 in the six months to December, requiring much larger deposits.

According to the research, those who moved home in London have lower upfront costs of around £12,188, as the amount of deposit increased by an average of £2,812 and fully offset by stamp duty holiday savings of £15,000. But this is the only region where the stamp duty savings offset the rise in average house price deposits.

Those moving home in the South East are £7,437 better off, with the growth in average deposit (£7,564) covered by stamp duty savings of £15,001. In the West Midlands, the deposit rise of £5,686 has been fully offset by stamp duty savings of £6,225, with £539 to spare.

In the South West, where the average deposit has risen by £9,311, home movers are £378 up after stamp duty savings of £9,689. Homemovers in all other regions have seen the savings in stamp duty partially offset the increase in average deposit cost.

Impact on first-time buyers

Before the stamp duty holiday, people buying their first home in London and the South East – where the price tags top the UK average of £266,381 (£480,221 and £310,986 respectively) – paid on average £9,011 in stamp duty, while those in the South East paid £549 in the six months to June 2020.

Those in the capital would have paid more than £712 more (£9,723) in stamp duty and those in the South-East would have paid more than double – £1,417 in the six months to Dec 2020 because of an increase in house prices, had the temporary relief measures not been introduced.

While the ‘holiday’ has saved money for those first-time buyers, the increase in house prices in the second half of the year – up £19,858 to £286,239 – has meant that they will need a bigger deposit of around £57,248 to take their first step on the property ladder.

Only first-time buyers in London and the South East are saving money as a result of the stamp duty relief – in London, the increase in deposit (£2,848 on average) offset by savings of £9,723 is leaving them £6,875 better off.

In the South East, first-time buyers are on average saving £2,054 as the increase in deposit (£3,471) has been partially offset by the stamp duty holiday savings of £1,417.

Almost four in 10 (38%) of first-time buyers in London paid stamp duty during the second half of 2020 – down from 86% before the holiday period started. Meanwhile, in the South East, this was down from 42% to 9%, followed by those in East Anglia and South West dropping from 18% and 15% respectively to 3% during the same period.

Andy Bickers, Mortgages Director, Halifax, comments: “Since the summer we have seen a huge surge in mortgage applications, as people raced to make much sought after stamp duty savings. “We know that lockdown restrictions have made it more practically challenging for those buying and selling, but the stamp duty holiday’ has been one of the main drivers of continued demand for sales and purchases during the pandemic and we will wait to see if further steps are taken that could give people more time.”

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