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Rishi Sunak’s temporary stamp duty cut has not caused house prices to soar in the past year, according to the Resolution Foundation, raising questions as to whether the strategy was a waste of money taxpayers.
While official data showed house prices rose 13.2% through June, the fastest rate since 2004, the think tank study released on Saturday found that the largest price increases occurred in areas that had benefited the least from tax cuts.
In addition to anecdotal evidence that the housing market has remained vibrant since the phasing out of stamp duty reductions began in July, research has suggested that the housing market will avoid a sharp correction when temporary incentives are removed altogether. ‘fall.
The Chancellor introduced the stamp duty holiday in July 2020 on the first £ 500,000 of any home purchase, offering a savings of up to £ 15,000. The tax-exempt amount has been halved to £ 250,000 from the end of June and will be phased out entirely on October 1, reverting to the standard limit of £ 125,000.
The Resolution Foundation said areas in England where average house prices were close to those offering the most benefits should have increased prices the most if the tax exemption was the main reason for the rise.
But he found not only that there was no correlation between areas with the largest gains and increases in house prices, but those with the least to gain saw house prices rise the most.
“Over the past year, prices rose 13% in one-fifth of local governments where savings from a tax exemption on transactions were negligible or non-existent, compared to 7% in one-fifth of local governments where savings were made. the highest have been achieved, ”said the think tank.
The findings suggest that other more global forces were pushing house prices up – low interest rates, forced savings during the pandemic, and changing tastes of homebuyers – and these have reoccurred across the world, which has seen the biggest spike in house prices in the past two decades.
Resolution Foundation researcher Krishan Shah said it was wrong to blame the stamp duty holiday for rising house prices. Instead, it raised ‘big questions about value for money, especially considering that politics in England and Northern Ireland alone are expected to cost around £ 4.4bn in revenue. lost taxes, ”he added.
The think tank’s work matches the latest anecdotal evidence suggesting that the housing market has not collapsed now that the stamp duty holiday has been partially removed.
Jeremy Leaf, former residential chairman of the Royal Institution of Chartered Surveyors and North London estate agent, said the latest market evidence suggested “the price correction expected immediately after [the withdrawal of the stamp duty holiday] did not materialize ”.
Chris Hare, senior economist at HSBC, added that while there was a rush to close the deals before the stamp duty holiday allowance was phased out from early July, the move “was certainly pushing forward not the UK housing market in a collapse “.
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