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Race to beat stamp duty rise sends property sales to record high

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Thu 22 Jul 2021

Race to beat stamp duty rise sends property sales to record high

Britain’s property market had its busiest month in history in June as buyers rushed to complete purchases before the full stamp duty holiday ended.

Official figures showed that 198,240 residential sales were completed in June — an increase of 219 per cent on last year, when activity was hit by lockdown, and 74.1 per cent higher than in May. This was the greatest number of transactions since HM Revenue & Customs began compiling the data in 2005.

The housing market is in the grip of a bubble with prices rising 10 per cent in the past year, as fast an increase as in the boom before the 2008 financial crisis. A combination of near zero interest rates, increased household savings and the temporary stamp duty holiday on the first £500,000 of any purchase has helped fuel the surge.

From June 30, the tax-free amount was reduced to £250,000; it is due to return to the standard level of £125,000 from October 1. HMRC said its transactions statistics for June “captured significant impacts from forestalling activity by taxpayers” as they completed purchases earlier “to take advantage of government housing market policies”.

Tom Bill, head of UK residential research at estate agents Knight Frank, said: “The record transaction numbers underline the extent to which stamp duty has distorted normal behaviour in the housing market this year.“Every quarter of 2021 will have its own stamp duty-related blip, which means tax will shape the housing market this year to a greater extent than any other year in its history.

“It was right to introduce the holiday at the height of the pandemic but it reached a point where some buyers and sellers were put off entering the market, leading to supply and demand imbalances. These should normalise over the second half of the year, leading to more downwards pressure on house prices.”

House prices in the UK have soared since the stamp duty holiday was introduced: the latest data from Rightmove showed that the average sale price climbed 5.7 per cent annually in July to £338,447. That would suggest the boom is slowing, as Office for National Statistics figures had house prices rising 10 per cent in the year to May.