Sale Surge & SDLT Deadline

Will sales still surge after the SDLT deadline?

It is less than a month until the lower stamp duty land tax (SDLT) thresholds come into force.  The question of whether sales will still surge after the change is now more pertinent than ever.

From 1 April, thresholds for stamp duty will return to their normal levels. You may recall that temporary SDLT relief measures were introduced in 2022 to stimulate the market.

Changing thresholds

After the end of March, SDLT will apply when buyers purchase a property that costs £125,000 (previously £250,000). For first-time buyers, it will apply from £300,000 for those who are buying a property worth £500,000 or less, compared to £425,000 for a property worth £625,000 or less previously.

The higher thresholds were introduced to boost the housing market after the economy faltered. However, with inflation now under greater control and interest rates and mortgage rates falling the tax break has done its job.

A driver of demand

The prospect of higher stamp duty has resulted in a huge stimulus in the market in the last few months.  This has come especially alongside increased consumer confidence and those lower interest and mortgage rates.

Rightmove recently reported that the number of available homes for sale was at a 10-year high in February and that January was a record month for applications for a mortgage in principle on the platform – up 49% on the same month last year. Buyers are racing to complete before the deadline. But what if they don’t make it?

As sales increase so do fall-throughs. They last peaked in the second quarter of 2021 when the initial SDLT holiday ended following the pandemic. In truth sales that are already well in progress are unlikely to collapse simply because the threshold deadline hasn’t been met. However, history also shows that sales traditionally fall when a stamp duty increase happens.

In a recent survey by GetAgent.co.uk nearly half of agents (47%) said they had seen a heightened sense of urgency amongst buyers ahead of the SDLT deadline. The same amount expect a drop in transaction levels in the months after.

A possible correction

It seems the market is likely to face a possible correction. Buyers who don’t complete will be disappointed, possibly tempering demand in the short-term. But, as many experts point out, a correction is not a crash and is largely inevitable.  Some buyers will be particularly impacted. For instance, Rightmove highlights the £11,250 of additional costs faced by first-time buyers buying a home between £500,001 and £625,000. However, many first-time buyers in lower-priced areas won’t be affected at all since there are many homes that will still be stamp duty free.

Similarly, the increased stamp duty payable comes at a time when savings are being made on mortgage rates and interest rates. Buyers may be facing higher stamp duty costs but for those who have been waiting for their affordability to improve and more choice to hit the market now still remains a great time to buy.

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