Stamp Duty changes will hold back house price growth next year, Zoopla has claimed.
The thresholds for the property tax are set to drop from £425,000 to £300,000 for first-time buyers and from £250,000 to £125,000 for homemovers in April 2025.
Research by Zoopla – based on enquiries to estate agents through its property portal – has warned that 83% of homebuyers currently looking for a home will pay more Stamp Duty from April 2025, up from the 49% of potential purchasers now.
The return of the 2% rate will hit existing owners looking to move and buy a home in the £125,000 to £250,000 price range, where a third of buyers are currently searching, Zoopla said.
The impact will be more keenly felt by buyers in the Midlands and Northern England, where up to 67% of sales sit in this price range.
In addition to the third of sales brought back into Stamp Duty, the 49% of sales above the £250,000 threshold will pay the extra £2,500 per sale. The ‘average home’ priced at £300,000 will see the amount of Stamp Duty double to £5,000 from April 2025.
An additional 20% of first-time buyers will also become liable for Stamp Duty. This means 40% will pay full or partial Stamp Duty. The extra costs for buyers will predominately fall on those in southern England due to the 30 and 34% of first-time buyers in the East, South East and London regions looking to buy homes in the £300,000 to £425,000 price band.
Higher buying costs will be reflected in what homebuyers are prepared to pay in 2025, resulting in a drag on house price growth of up to 1%, Zoopla warns.
Richard Donnell, executive director at Zoopla, said “the growing complexity of SDLT makes assessing its impact on market activity and pricing increasingly difficult. Whilst an additional Stamp Duty payment of £2,500 might be more manageable for those purchasing £1m homes, it’s a much bigger cost for those buying cheaper homes. Faced with this higher cost, homebuyers will want it reflected in the price they pay for their home and will seek to make offers, keeping prices rises in check over 2025 and into 2026. These changes are likely to take 0.5% to 1% off house price growth in 2025 hitting buyers in higher value markets and re-enforcing a north-south divide for price growth.”
A GetAgent survey reveals 38% of agents believe the lack of a Stamp Duty relief extension will have a significant impact on the health of the property market.
The vast majority of estate agents are disappointed the current Stamp Duty relief thresholds were not extended during the Autumn Statement and believe the decision will hamper the property market’s recovery.
As many as 84% were hoping to see an extension to the current Stamp Duty relief thresholds with 59% hoping it would be extended to all buyers, not just first-time buyers.
Instead, from April next year, FTBs will pay stamp duty on purchases of £300,000 or more, whilst existing homebuyers will see the tax charged on homes valued from £125,000 or higher.
Impact market activity
Over half of those questioned said the failure to extend the relief will impact market activity from April next year, whilst a further 20% remain on the fence and 24% think there will be no impact.
Also, 38% of agents fear that removing the Stamp Duty relief will have a significant impact on the health of the property market, although a more optimistic 41% think market conditions will continue to improve.
As a result, many are expecting to see fewer FTBs entering the market and that lower offers will be made to account for the additional costs.
Half of the agents surveyed by GetAgent, however, also believe that further interest rate cuts will soften the impact of the SDLT increases and help steady the market.
Co-founder and CEO of GetAgent.co.uk, Colby Short, commented “Stamp Duty has always been a thorn in the side of homebuyers but, whilst there may certainly be a brief adjustment period and some instability caused by the rush to complete ahead of the deadline, we don’t expect it to completely deter them from their aspirations of homeownership.”