House sales surged in March to beat stamp duty hike
The number of property transactions jumped dramatically between February and March 2016 before the 3% stamp duty on additional homes came into effect on 1 April, according to new data.
HMRC reports that the number of residential transactions was 74.8% higher in March 2016 compared with February 2016.
Property completions in the UK with a value of £40,000 or more – when stamp duty kicks in – went up from 92,690 in February 2016 to 161,990 in March 2016. A year earlier in March 2015, transactions were just 91,490.
HMRC says this large increase in transactions in March 2016 “is likely to be associated with the introduction of the higher rates on additional properties in April 2016”.
It adds: “Additional non-tax factors may have played a role as well – for example, the Bank of England's plans to curb Buy-to-Let mortgages resulting in a rush to purchase.”
A Treasury spokesperson adds: “House purchases vary widely across the seasons and we always expected some buyers to bring forward their purchases - indeed this was factored into our costing when the [higher stamp duty on additional properties] policy was announced. We expect this to level out in the coming months."
Spike in March mortgage lending
Meanwhile, newly released data from the Council for Mortgage Lenders shows a similar picture. Mortgage lending was 43% higher in March compared to February, and 59% higher than in March 2015.
Commenting on the data, Lucian Cook, Savills head of residential research says: “House sales were 77% higher than the same month last year and 75% higher than February of this year.
“Alongside this, newly released CML data suggests that while borrowing to support this uplift in sales volumes has been significant, there has also been a notable weighting towards cash buyers.
“These figures confirm a frenzy of buying activity before the 1 April introduction of the 3% stamp duty surcharge for additional homes purchases, and underscore the significant distorting effect that stamp duty changes can have on the housing market. This is clearly a one-off event and such volumes are unsustainable against a backdrop of economic uncertainty and the prospect of an increased regulatory environment for buy to let borrowing.
“We’d expect a significant fall in transaction levels in the second quarter of the year to offset the March activity and the stamp duty surcharge to act as a longer-term drag on housing transactions.”
Andrew Bridges, managing director of London estate agent Stirling Ackroyd, adds: “Movement is back on track in the property market – and it’s encouraging to see more selling and buying. But the flurry of the last month could only be a short-term feature – April showers lie ahead….
“After the distraction of stamp duty changes, it’s back to the same challenges for the property market. A lack of supply isn’t helping the situation – pushing many Londoners out of the capital in search of affordable homes.”
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.