Home buyers will rush to complete deals in London and other regions in the first months of next year to avoid a hike in stamp duty, the chief economist of a major building society has said.
The surge in activity in the property market could push up prices as more people compete to purchase houses and flats in time to beat the April 1 deadline when stamp duty rises will come into force.
The threshold after which people start to pay stamp duty is currently £250,000, and £425,000 for first time buyers, levels which were raised under the Tories.
Nationwide expects the Chancellor’s decision to let the price at which buyers start paying stamp duty drop back to the higher pre-2022 levels would affect the timing of deals.
Robert Gardner, the building society’s chief economist, said buyers would aim to ensure their house purchases complete before the tax change takes effect.
“This will lead to a jump in transactions in the first three months of 2025 (especially March), and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes,” he predicted.
The stamp duty rate up to March 31 will be zero for properties up to £250,000, five per cent for the next £675,000 (the portion from £250,001 to £925,000), ten per cent for the next £575,000 (the portion from £925,001 to £1.5 million), and 12 per cent for the remaining amount (the portion above £1.5 million).
From April 1, it will be zero up to £125,000, two per cent for the next £125,000 (the portion from £125,001 to £250,000), five per cent for the next £675,000 (the portion from £250,001 to £925,000), ten per cent for the next £575,000 (the portion from £925,001 to £1.5 million), and 12 per cent for the remaining amount (the portion above £1.5 million).
For first time buyers, there is currently no stamp duty on purchases up to £425,000, and five per cent on the portion from £425,001 to £625,000. If the price is over £625,000, they do not get this special relief.
From April 1, the zero stamp duty threshold will be properties up to £300,000, five per cent on the portion from £300,001 to £500,000, and above this first time buyers do not get special relief.
The changes are expected to particularly hit buyers in London, where the average property price is around £690,000 and the South East.
The latest figures from Nationwide showed house price growth slowed in October, with valuations rising 0.1 per cent month on month.
The annual growth rate was 2.4 per cent last month, easing back from a two-year high of 3.2 per cent in September, the building society said.
The average UK house price in October was £265,738, according to the figures.
Mr Gardner said: “Housing market activity has remained relatively resilient in recent months, with the number of mortgage approvals approaching the levels seen pre-pandemic, despite the significantly higher interest rate environment.
“Providing the economy continues to recover steadily, as we expect, housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth.”
Nationwide said “solid” labour market conditions, with low levels of unemployment and wage growth, had helped drive a steady rise in market activity and valuations this year.
