If the housing market stays on course, it is predicted that by 2030 home buyers will pay over double the amount current stamp duty, giving the taxman an increase from £8.6bn in 2023 to £18.1bn, according to OBR forecasts analysed by Coventry Building Society. Dr Christine Whitehead, of London School of Economics says this is the “opposite of what the government should be doing” and called for the removal of stamp duty, particularly for elderly people. She believes that this would encourage the sale of more properties which, she says, evidence has shown to be “more effective for the economy than raising stamp duty”.
Houses for sale in higher price brackets have seen stagnation in recent months. Property site, Rightmove, found that “top of the ladder” properties had fallen in asking price by 3.3% in the month to November, from £675,343 to £653,290. The company’s latest report predicts a “stronger year for prices in 2025 … especially if mortgage rates drop to a level that gives greater affordability to some movers who have been waiting in the wings until now.”
However, if 2025 is set to be a stronger year for housing prices, this does not quite solve present housing market issues. House prices have remained high; however, we are unlikely to see the necessary drops in mortgage rates predicted by Rightmove. The Bank of England has begun to reduce the base rate following a fall in inflation but, despite this, average two-year fixed rate mortgages are now around 5.5%, showing that mortgages are actually continuing to increase.
Changes in stamp duty are set to be in place from 1st April. From this date, buyers will pay tax on any amount over £125,000, up from the current threshold of £250,000. The first-time buyer threshold will return to £300,000 (from £425,000). This will likely create an influx of buyers rushing to complete the purchase of properties in the first half of the year before thresholds drop, but will inevitably taper off in the second half of the year in an already inflated market with low wage growth.
In theory, there are still incentives for first time buyers. However, the reality of the average house price currently standing at £291,000 doesn’t allow many first time buyers a first step on the housing ladder.
Moreover, people who already own their homes and wish to sell are having to make significant reductions in asking price in order to secure a sale, and will most likely be forced to downsize their aspirations when buying their next property. More home movers looking to buy in the lower-mid price bracket will create more competition for first time buyers, who are being forced into this bracket by lack of affordable housing.
The problem is summed up by Charlie Lamdin, who runs BestAgent, a network of estate agents. He said: “owner-occupier housing cost annual inflation climbing inexorably to 7.4% with no signs of coming down, plus a rise in downsizing, have left many owners of larger, detached homes bewildered as to why they can’t sell them, even though they’ve dropped the asking price by more than 20% in some cases.”
He suggests the best time to have sold a property was two years ago.