A booming market in second homes has boosted Treasury revenue this year, more than compensating for a stamp duty holiday that let thousands of homebuyers off paying tax.
Carol Lewis www.thetimes.co.uk
HM Revenue & Customs has taken £11.44 billion in receipts from the property tax so far this year. It is the highest amount collected in the first 11 months of a year since 2017.
Rishi Sunak raised the threshold for stamp duty in England and Northern Ireland from £125,000 to £500,000 from July 8, 2020, until June 30, 2021, saving buyers up to £15,000. The threshold was then dropped to £250,000 until September 30, when it reverted to £125,000. There were similar, although less generous, breaks in Scotland and Wales.
The tax break applied to all home purchases, including those of buy-to-let properties and second homes (except in Wales), although the 3 per cent additional home levy still applied in such cases. More than 24,000 second homes were bought in Britain in the 12 months before June 30, according to the estate agency Hamptons, many of them in holiday hotspots such as Cornwall, Devon, north Norfolk and the Lake District.
Figures published yesterday by HMRC showed £1.21 billion in stamp duty revenue in November. This is less than in October, when £1.32 billion was collected, but 22 per cent higher than pre-pandemic levels in November 2019, according to an analysis of the data by Coventry Building Society.
Jonathan Stinton, its head of intermediary relationships, said: “It’s been a big year for the Treasury’s stamp duty receipts, despite hundreds of thousands of buyers being exempt from paying it for the first nine months of 2021. This shows just how high the demand for higher-value homes, second homes and rental properties has been this year.”
HMRC estimates that in the financial year 2021-22 there will be 974,310 residential property sales, making it the busiest year in a decade. The surge in home moves has been precipitated by lockdown disillusionment, increased savings and low mortgage rates. The combination of these factors led many people to adjust their lifestyles during the pandemic: many sought extra space for home offices and bigger gardens away from the cities; some wealthier families decided to acquire second homes in coastal and country regions.
Lucian Cook, head of residential research at the estate agency Savills, said: “We estimate that the stamp duty holiday amounted to a tax break to homebuyers of around £6.4 billion, but given the unexpected strength in the market despite — or arguably because of — coronavirus, receipts to the Treasury have held up remarkably well.
“Over the past 18 months we’ve seen lifestyle drivers and low interest rates support incredibly strong levels of house price growth and a real surge in activity. The Treasury has particularly benefited from high transaction volumes at the top end of the market, where the stamp duty take is highest, bolstered by the 3 per cent surcharge [for those buying second homes] over the period of the stamp duty holiday and beyond.”
One in 16 homes in the UK are expected to have changed hands this year, but the demand far outstrips supply, and each estate agency branch has an average of one home for sale for every 24 would-be buyers, according to the property portal Rightmove. Across the UK only 400,000 properties are now for sale.
At this point in 2020 the number was 630,000, the independent property data analyst TwentyCi said yesterday. It added that if the property market continued as it was, all stock would run out, except in inner London, by the end of next year. Worst affected would be the southwest, where there would be no homes left to sell after seven and a half months.
Anthony Codling, chief executive of Twindig, a property platform, said: “We were surprised that the level of residential housing transactions bounced back so quickly after the end of the stamp duty holiday.
“[It] implies there is more to the underlying level of housing transactions than the impact of stamp duty holidays alone. The pandemic is having a significant impact on where and how we choose to live and where and how we choose to work, and it seems that the race for space is not over just yet.”