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Life After the Stamp Duty Holiday

The stamp duty holiday has finally ended, but how has this tax saving initiative impacted the housing market and what is likely to happen in the coming months?

It's been a year since chancellor Rishi Sunak announced a stamp duty cut to 'catalyse the housing market and boost confidence', and boy, did it achieve just that, with house prices and mortgage borrowing quickly hitting record highs after the fallow period of the first lockdown.

Originally scheduled to end on March 31, the decision to extend the stamp duty holiday to June 30 was hugely welcomed, enabling homebuyers in England and Northern Ireland to continue to pay no stamp duty on homes priced at £500,000 or below, thus allowing them to save up to £15,000 on their property purchases.

As of July 1 however, this saving tapers, meaning that homebuyers now don't pay stamp duty on a home worth up to £250,000. This will continue until the end of September, after which stamp duty rates will return to previous levels.

So how will the market fare in this transitional period and beyond? Perhaps a good indicator is to look at borrowing and transactions in April - the month after the stamp duty holiday was originally due to end.

Figures from the Bank of England and HM Revenue and Customs show a fall in mortgage borrowing and property transactions respectively for this period. Meanwhile, according to the Nationwide, house prices were up more than two per cent on the previous month, with the extended tax relief prompting a sudden 're-acceleration'.

Clearly the super-charged activity of the previous year will not last, but the market is not about to fall off the edge of a cliff either. Indeed Tim Bannister, property expert at Rightmove, expects the property market to remain strong for at least the rest of the year. 'Some of that demand has now been met, and the phasing out of stamp duty reliefs has also taken away some of the urgency to move, though our high traffic and search data indicate that there is still strong buyer demand,' he offers.

Interestingly, some industry pundits reckon the reopening of the hospitality and travel industries could have more impact than the ending of the stamp duty break, with moving becoming less of a priority for those who now prefer to splash their cash on holidays, eating out etc. Such a dip in buyers could help reduce the rate that house prices are increasing, as could the fact that supply is predicted to increase as people become more confident about the selling process and continue to reassess their living preferences as a result of the pandemic. Most agree that a levelling off of house prices will be a positive for the market.

In addition, current home buyers seem fairly sangfroid about missing the September deadline for the £250,000 threshold, with a recent survey revealing that 81 per cent strongly suspected they might do so. However, having commited to moving, they were willing to do so with or without the tax break incentive.

So in summary, there can be little doubt that the stamp duty holiday gave a significant fillip to the housing market when it needed it most, but as it draws to a close, optimism remains high and the market resilient.

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