As had been predicted, the stamp duty deadline resulted in lower house prices as first-time buyers lost incentive to buy homes. Since there is now a 1% stamp duty, the surge in home sales has come to a screeching halt. In fact, March saw a fall of .9% year-on-year as a result of the deadline.
Market analysts had forecast that there would either be sideways motion or a decline and they have proven accurate once again. The duty is reinstated for those properties ranging from £125,000 to £250,000 and that is the bracket within which most first time buyers are in.
Research shows that approximately four out of every ten of those first time buyers benefited from the stamp tax holiday for the two years it had been suspended and that it really isn’t clear how much that actually affected the market. There is no clear-cut way to determine how many first-time buyers would have purchased homes during that time if the stamp duty had been in force.
Even so, with the stamp duty being reintroduced there is likely to be a negative impact on the market. This is not good news since there is already a slump which needs to be overcome. According to the most recent Nationwide survey, there will be as many as 65% of first-time buyers who will be affected by the stamp duty within the coming year.
It is further estimated that the amount of revenue generated from the stamp duty will be approximately £600 million. As well, nationwide believes that the 7% stamp duty rate on homes valued at £2 million or greater will also have an effect on the market even if it is just a small one.
The bottom line is that the housing market, which is already troubled, is likely to see further decline. It is already being reported that London with its traditionally booming market has also seen a significant decrease in sales.
As an example, London had been reporting one of the strongest year-on-year rises in prices but as a result of the reintroduction of the stamp duty tax even London saw a dip of zero .7% in March. In addition, it should be noted that the strongest growth occurred in the North whilst Wales saw a huge drop in house prices by 3.1%.