A MAJOR building society has estimated that the stamp duty threshold falling next year will lead to more house sales in the first quarter of 2025, as buyers attempt to avoid the tax.
According to Nationwide’s House Price Review and Outlook for 2025, upcoming stamp duty changes are “likely to generate volatility” as buyers move forward with their purchases.
More than one in five (22%) first-time buyers have paid stamp duty so far this year, but this figure is likely to rise in the coming months as the stamp duty threshold will drop from £425,000 to £300,000 from April 1st next year.
Jonathan Bone, Head of Mortgages at Better.co.uk, has provided insight into what this means for the future of FTB and the housing market as a whole.
“The current stamp duty threshold for first-time buyers in England and Northern Ireland is £425,000, with a full exemption on the first £300,000 and a reduced rate between £300,000 and £425,000.
“However, this year there has been a massive increase in the number of people who are paying stamp-duty tax, with nearly a quarter having to do so. But why?
“One of the biggest driving forces behind increasing numbers is due to property prices across the country.
“Property prices in the UK have climbed sharply, with the median mortgage value over the last year for FTB standing at £217,500 and a typical deposit amounting to £40,000, according to data by Better.co.uk. This high deposit, combined with increased property values, underscores the rising affordability challenges for FTB despite current exemptions on stamp duty in certain cases.
“In cities where property prices are significantly above the national median, such as London and Cambridge (*averaging £505,925 and £365,234, respectively), the reduction in the stamp duty threshold is expected to have a notable impact on buyers. However, in more affordable areas like Hull, where the average property price is just *£123,620, the reduction may have minimal effect
“Inflation has also meant buyers may have a reduced ability to save or buy a property outright, leading to larger mortgages needed to afford pricier properties.
“The previous threshold was introduced in September 2022 as a temporary relief for FTB to get them on the property ladder. However, much to the disappointment of FTB, Labour has decided to continue with the previous plans put in place by the Conservative party.
“Chancellor Rachel Reeves left any mention of stamp duty out of the Autumn Budget, confirming that changes are on the horizon.
“But it’s not only FTB that will be impacted, homeowners looking to move will also see a reduction. The threshold will fall from £250,000 to £125,000. This shift means that many buyers, particularly in areas with high property prices, will be facing stamp duty costs much sooner than expected.”