The stamp duty holiday has significantly boosted London’s housing market, with new sales agreed up by over a quarter in just two weeks, new data has shown.
UK house prices rose 0.2 per cent in June as a jump in demand for houses outstripped a fall in the number of sellers, the figures also showed.
But the market has still taken a big hit this year, said property website Zoopla, which compiled the data. Housing sales in 2020 so far are around 20 per cent below the same period in 2019, amounting to around £27bn in lost deals.
Chancellor Rishi Sunak earlier this month unveiled a “holiday” for the payment of the stamp duty property tax in a bid to boost the market and the economy. This raised the threshold at which stamp duty is paid from £125,000 to £500,000 until March 2021.
The move has spurred activity in London, according to Zoopla’s data, with new sales agreed up 27 per cent over the last two weeks. That compares to a six per cent rise across the rest of the country.
Zoopla said this was because London’s higher house prices meant it stood to benefit relatively more from an increase in the tax threshold.
London and UK house prices continue to rise
Overall, London house prices rose 1.7 per cent in June – before the stamp duty cut came in – compared to a year earlier.
Month on month prices flatlined. This meant the average London house price stood at £479,300.
UK house prices as a whole were up 2.7 per cent year on year, although the monthly growth rate halved to 0.2 per cent. The average UK house price is £219,500.
The rise in prices “certainly seems at odds” with a cratering economy and rising unemployment, said Richard Donnell, Zoopla’s research director.
Yet he said the release of pent-up demand for new houses after the market was put on ice during lockdown would likely support prices for the rest of the year.
In London, buyer demand is up 28 per cent in 2020 so far compared to the same period a year earlier. This was partly because Brexit subdued activity last year.
Supply has fallen 11.2 per cent, however, meaning relatively higher demand is pushing up prices.
House prices expected to fall by 2021
But Zoopla said prices were likely to eventually fall as job losses and uncertainty take a toll.
“We expect rising unemployment to weigh on market activity over the final quarter of 2020 and into the first half of 2021,” Donnell said.
“The impact on pricing looks set to be pushed into 2021 as a result of sizable government support for the economy.”
However, Zoopla’s data laid bare the damage that has already been done to the housing market, despite London and UK activity being boosted by the stamp duty cut.
The closure of estate agents over the lockdown reduced new supply and agreed sales by 90 per cent.
So far this year, sales are 20 per cent below 2019 levels. Roughly 124,000 sales that were expected to take place and could have been worth £27bn since March did not happen.
Zoopla said it expects sales to be around 15 per cent lower in 2020 than they were last year.