What Will Happen When the Stamp Duty Holiday Ends? Will house price growth continue after stamp duty ends?
The property market is rising and quickly, with annualised growth at 8.7% in the year to February 2021, according to the latest house price index. The Stamp Duty holiday (and its subsequent extension) undoubtedly gave a significant boost to the market and many are now trying to complete transactions. So when the Stamp Duty holiday does end, will house prices fall after that?
In short, I think the answer is that prices will continue to rise. We may see a small easing of prices immediately around the Stamp Duty cliff edge, but the factors driving this increase won’t change, and that is lack of supply, increased demand for commuter regions as people move further out and away from London, cheap credit and a sharp increase in the supply of money. In fact, when we tell buyers that they have to factor in Stamp Duty costs to their purchase as we are so close to the deadline, we find most have.
More disposable income means increased spend
What has been really overlooked is where the increased money supply has landed and it has been into people’s back pockets as commuting bills and discretionary spending has been slashed. This money has to find a home and quite literally so in this instance. Saving thousands on commuting bills allows this to be spent on housing, but as commutes have reduced in frequency, with more home working, people have moved out further from London to enjoy lower house prices and this is supported with findings that London really undershot the market with the lowest pace of growth nationally.
The Sussex dream
In Sussex we traditionally see part of the Surrey commuter belt relocate here with their families but now we are seeing movers from further and deeper into London as they are less location sensitive and this has led to a surge in local prices. I believe this will continue regardless of the Stamp Duty.
The fundamental drivers to this market uptick won’t change with Stamp Duty and so while there may be a small and temporary dip in prices to reflect this, the economic recovery and key drivers will, I believe, ensure that the market continues to grow throughout 2021.