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There is plenty of life left in the post-stamp duty holiday market – Rowntree

by: Richard Rowntree, managing director of mortgages at Paragon Bank
  • 05/07/2021
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There is plenty of life left in the post-stamp duty holiday market – Rowntree
As we enter the start of the wind down of the stamp duty holiday, Chancellor Rishi Sunak can be pleased that the scheme achieved its objective of stimulating housing demand.


Although I expect that the surge in buyer demand experienced over the past year has in part been driven by a fundamental shift in lifestyle changes and the desire for something ‘different’, there is no denying that the stamp duty holiday has been a major contributory factor.

Looking at Paragon’s book, we see that over 50 per cent of the business we’re still taking is for purchases.    

There’s little doubt the holiday particularly resonated with buy-to-let investors and I’m pleased the Treasury saw sense and pushed back the cliff-edge of the initial March deadline and introduced the September taper. 

The opportunity to acquire new property with cheaper buying costs has been compelling, particularly during a period of intense tenant demand which shows no sign of letting up. The opportunity to secure a maximum £15,000 tax saving cannot be ignored when analysing a property investment.   

Industry figures show that 29,000 buy-to-let loans were written for house purchase during the first quarter of 2021.  

Landlords have also taken the opportunity to incorporate their portfolio structures into limited companies and this will show as purchase business.

This means that it is still unclear as to what the final total will be, but we can be confident that the initiative has acted as an incentive for investment when we compare the number we have now to the figure from the same period last year which was just a shade over 18,000.  

The first quarter of 2021 was the highest since the corresponding quarter of 2016, after which the three per cent stamp duty surcharge was applied to buy-to-let purchases.  


Gains in high value areas 

What’s telling is that the regions with the highest average house prices recorded the greatest spikes in buy-to-let house purchase.  

London, for example, recorded a 76 per cent increase in buy-to-let mortgages for house purchase during the first three months of the year compared to the same period last year. Similarly, the South East was up 66 per cent and the South West up 62 per cent.  

Northern regions, where the benefit of the stamp duty holiday is less pronounced due to lower average house prices, still experienced impressive growth, but it was muted compared to southern locations. The North West was up 30 per cent in terms of the volume of buy-to-let mortgages for house purchase, whilst Yorkshire and Humber recorded a 34 per cent increase.  

Of course, there could be other contributing factors why the South has seen a sharper increase in buy-to-let house purchase.  

UK Finance recently noted in its Household Finance Review that Londoners have been selling up and using their strong equity positions to buy property in locations further afield then the suburbs or periphery outright.  


Shift to renting 

However, not all want to move to a new area and buy right away. Renting is the ideal option for many as they test a location before buying and landlords have been responding by acquiring new property in southern areas outside of the traditional London commuter belt.  

Our in-house surveyors report strong demand for property in the likes of Bristol, picturesque southern counties and coastal locations.  

One acquaintance of mine is doing exactly that currently and is searching for family rental accommodation in Buckinghamshire.  

The issue she faces is competition for that type of property, which is fierce, and she is facing the prospect of sealed bids from nine to 10 competing families for the homes she is interested in. 

Landlords are responding and adding family homes to their portfolios. Purchases of buy-to-let detached homes was 66 per cent higher year-on-year in the first quarter, whilst semi-detached homes were 56 per cent up.     

There is plenty of life left in this shift in housing demand and whilst the stamp duty holiday helped light the touch paper for property sales, there are longer-term factors at play here that are creating sustained demand for housing more broadly.  

That will benefit landlords and, of course, Rishi’s tax take. 

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