Buyers should stop worrying about stamp duty holiday – here's why

Prospective house buyers anxious that they may not be able to meet the stamp duty holiday may do well by reconsidering their house buying plans altogether. The stamp duty relief deadline of the 31 March has been much in the headlines lately, not least because it will be unachievable for many buyers working to complete a house purchase at the moment. And yet, it may well be something of a red herring – because there is now evidence that record-breaking house price growth has eclipsed any savings that technically can be made by not paying stamp duty.

The latest house price index from Halifax touches on this issue, with the Managing Director, Russell Galley, pointing out that 'the stamp duty saving of £2,500 on a home costing £250,000 is now far outweighed by the average increase in property prices since July.' To put this average savings figure into perspective, the average house price in the UK has increased by more than £15,000 within the same time frame. 

In other words, if you're desperately trying to secure a house purchase right now, you're very likely overpaying, especially if you're looking at in-demand areas of the country or a larger family home just about anywhere. If you really want to make a saving on a house, the first step right now is to relax and hold your nerve; the second is to reconsider where you're willing to live. 

It may sound counterintuitive, perverse even, to advise people to look at properties in London and other expensive cities, but you could make some real savings right now by looking at flats rather than (semi-)detached properties. Prices in several prime areas of London are reported to have dropped 30 per cent – a far greater saving than any stamp duty holiday. On the other hand, if you're in Manchester and Edinburgh, where prices have been rising steadily since Covid, you may wish to look at cheaper surrounding areas where you could secure a good discount. 

Should you wait until next year to even start looking, in case house prices start coming down? There's no definitive answer to this question, and Halifax are very circumspect in their latest prognosis of 2021 housing market conditions, given that so many previous predictions haven't quite materialised. Galley says:

'The housing market has been much more resilient than many predicted at the outset of the pandemic, and indeed many households remain confident about further price growth next year. However, the economic environment continues to look challenging. With unemployment predicted to peak around the middle of next year, and the UK’s economy not expected to fully recover the ground lost over 2020 for a number of years, a slowdown in housing market activity is likely over the next 12 months.'

Note how there is no longer any certainty about just at what point in 2021 prices may start coming down, or if indeed they will. Local market conditions will very likely prevail over any blanket trends – so, do your research into your local area and neighbouring areas to see where savings could be made now, not in 12 months' time. You'll also need to look into mortgages – start your research now, with the help of Habito's free comparison tool below.