How stamp duty cuts are likely to impact on house prices

Last week, the government announced it would be scrapping the initial £125,000 price threshold at which stamp duty is payable, meaning the average homebuyer is now set to save as much as £2,500 on the purchase of a property. However, the predicted spike in demand is likely to result in already over-inflated house prices rising even further.

The latest market analysis by specialist property lending experts, Octane Capital, has shown that the average house price across England could spike by a further £34,000 over the next 12 months as a result, after looking at the average monthly rate of house price growth seen following the government’s initial stamp duty holiday.

The figures show that during the stamp duty holiday (July 2020 and September 2021), the average house price across England climbed at a rate of 0.9% per month, up from £253,226 when the scheme was launched, to £287,370 when the final curtain fell.

Since then, the market has shown no signs of slowing and today, the average house price across England is £311,583. Should the latest stamp duty cut spur a similar level of house price growth, Octane Capital estimates a further 10.8% increase over the next 12 months based on the market’s previous performance - equating to a jump of £33,610 in the average value of a home.

Homebuyers in the South East could be due to see the largest increase in the cost of buying over the next year, with Octane Capital estimating that house prices could climb by £40,268 as a result of the latest stamp duty cuts.

The South West (£37,768) and East of England (£35,631) could also see some of the largest annual increases in the cost of buying should the latest SDLT cuts result in a similar level of house price growth as the initial stamp duty holiday.

While the London market benefitted to a far lesser extent from the original stamp duty holiday, a similar rate of growth following the latest cuts could still add £23,570 to the average cost of a home in the next 12 months.

Kensington and Chelsea is estimated to see the largest uplift at local authority level, with the average property value increasing by almost £109,000 in the next year.

Outside of London, homebuyers in Elmbridge (£72,734), St Albans (£63,076), South Oxfordshire (£60,173), South Hams (£57,067), Mole Valley (£55,192) and Winchester (£53,981) could see the cost of buying increase by the largest annual levels following the latest SDLT cuts.

Jonathan Samuels, CEO of Octane Capital, commented: “The property market landscape has become increasingly unstable in recent months, with increasing mortgage rates and the spiralling cost of living adding to the economic angst of the nation.

"But rather than steady the ship, the government has once again chosen to rock the boat with ill-advised initiatives designed to fuel demand and push house prices ever higher.

"This will, of course, help bolster market activity in the short term, however, it will also push the dream of homeownership further out of reach for many, who simply can’t muster such a sizeable mortgage deposit.

"So while the current government can pat themselves on the back at a job well done in keeping market sentiment afloat at present, the real worry is what’s to come further down the line and how their successors will deal with the mess they’ve left when the market does burst at the seams.”