According to predictions from the UK’s largest lender, home sales are expected to increase at the start of next year. People are rushing to buy homes before the stamp duty rate increases, in line with changes announced in the Budget this week. From March 2025, the new rules will impact one fifth of first-time buyers who would have previously been exempt from paying the tax. This is expected to have a smaller impact than previous changes, as high interest rates are still discouraging buyers.
The current environment of relatively high interest rates means that buyers are finding affordability of property somewhat of an ongoing issue. This has effectively dampened housing market activity more generally, and is expected to impact sales. However, the changes to stamp duty rates were widely anticipated, meaning they are not expected to have as large of an effect compared to previous changes.
Nationwide predicts an increase in sales following the stamp duty change, which will be followed by a slump over the next six months. Past experiences of similar stamp duty changes have resulted in similar fluctuations. It is estimated that the changes will impact regions where housing is more expensive, such as London and southeast England, more than areas where housing is cheaper. However, the predicted impact is that affordability concerns, particularly for first-time buyers, will continue to impact the housing market.
Buyers of homes worth less than £250,000 currently do not pay stamp duty. For first-time buyers, the threshold is £425,000. However, following the Budget changes, these thresholds will revert to previous levels from March 2025, which will result in a greater number of buyers being impacted by the tax. Yopa’s CEO, Verona Frankish, predicts that the coming changes to stamp duty will encourage individuals to make a purchase before Christmas. Nonetheless, she added that any changes in mortgage rates next year may have a much more significant impact.
Other changes to stamp duty that have been introduced this week will impact landlords purchasing properties to rent out, with the rate of additional tax rising from 3% to 5%. Industry analysts have predicted that this will lead to a reduction in purchases by landlords. Although UK house prices have fallen, they have been gradually rising over the past year as interest rates have declined, making purchasing homes more appealing for buyers. The average price of property in the UK was £265,738 in October, according to Nationwide’s latest data
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