Second-time buyers benefitted from stamp duty holiday

Second and third-time homemovers disproportionately benefitted from the stamp duty exemption because it offered a strong tax benefit for pricier properties.

UK Finance made the conclusion in its Household Finance Review for Q3 2021, as the relief helped investors save on their tax bill when purchasing properties worth up to £500,000.

The trade body said: “Even with the expected post-stamp duty deadline softening, the main driver of growth in the residential sector in Q3 came from homemovers.

“Movers disproportionately benefitted from the exemption, but in the second and third phases, the exemption was less generous for higher value property purchases, which are more likely to be bought by homemovers further up the housing ladder.

“The continued strength in homemover activity as the exemption was phased out, following nearly a decade of stagnation, suggests there could be a more persistent attitudinal change to come out of the nation’s experience during the pandemic.”

Nigel Purves, chief executive of Wayhome, lamented the impact of the stamp duty holiday on first-time buyers.

He said: “The evidence speaks for itself – home movers disproportionately benefited from the governement’s support through the pandemic, while would-be first time buyers were hung out to dry.

“The first rung of the property ladder is getting further and further away – salaries have fallen behind inflation, meaning even those in full-time work face needing to save for more than 15 years for a deposit. Once they’ve got that deposit, restrictive lending criteria means getting a mortgage is still no mean feat.

“The current landscape is unsustainable; homeownership shouldn’t be an impossible dream – we need radical change in the property market to make it a reality for more people.”

The research also showed that people are releasing growing amounts of equity from their properties.

The average withdrawn for home improvements is over £50,000.

However the typical lump sums withdrawn during the stamp duty holiday for ‘other purposes’ peaked at £106,000.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “Property is the new piggy bank. Since August 2020, we’ve been withdrawing more and more equity when we remortgage, as rising property prices have given people the confidence to raid the equity in their home, and the stamp duty holiday persuaded them that this was the time to snap up a second property.

“The attractions of a holiday home were magnified by lockdowns, when people realised the limitations of full time city life. Meanwhile, runaway house prices presented them with the opportunity to take more equity from their home, and the stamp duty holiday provided a window during which they could pay far less tax.”

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