The price of an average home in the UK fell by 0.5% in June as the full stamp duty holiday came to an end, industry figures show. It was the first month-on-month drop since January and suggests peak buyer demand has likely passed, according to research by Halifax. However, the bank said typical property values were still more than £21,000 higher than a year ago, with an average home costing £260,358 last month. June’s price drop meant annual house price inflation eased slightly to 8.8%, from May’s 14-year high of 9.6%. The stamp duty holiday in England and Northern Ireland is now being tapered and will be phased out entirely in autumn. The “nil rate” stamp duty band shrank from £500,000 to £250,000 from 1 July, prompting a rush of buyers trying to beat the deadline. It will revert to its normal level of £125,000 from 1 October. Commentators believe that with the stamp duty holiday now being phased out, it was predicted the market might start to lose some steam entering the latter half of the year, and it’s unlikely that those with mortgages approved in the early months of summer expected to benefit from the maximum tax break, given the time needed to complete transactions. That said, with the tapered approach, those purchasing at the current average price of £260,358 would still only pay about £500 in stamp duty at today’s rates, increasing to around £3,000 when things return to normal from the start of October. That power of home-movers to drive the market, as people look to find properties with more space, spurred on by increased time spent at home during the pandemic, won’t fade entirely as the economy recovers. Coupled with buyers chasing the relatively small number of available properties, and continued low borrowing rates, it’s a trend which can sustain high average prices for some time to come. While the reduction in stamp duty relief means less pressure on the demand side, supply is still constrained, construction is getting harder and more expensive, and a mass sell-off from property owners is unlikely in the absence of significant interest rate rises.

Past performance is not a reliable guide to the future. The value of investments and the income from them can go down as well as up. The value of tax reliefs depend upon individual circumstances and tax rules may change. The FCA does not regulate tax advice. This newsletter is provided strictly for general consideration only and is based on our understanding of law and HM Revenue & Customs practice as of July 2021 and the contents of the Finance Bill. No action must be taken or refrained from based on its contents alone. Accordingly, no responsibility can be assumed for any loss occasioned in connection with the content hereof and any such action or inaction. Professional advice is necessary for every case.