UK House Price Inflation Jumped 9% Before Stamp Duty Rise


The Law Of... keeping an eye on stamp duty

Stamp duty changes saw house price inflation jump 9% in March, as landlords looked to buy investment properties before a stamp duty increase came into force.

UK House Price Inflation Jumped 9% Before Stamp Duty Rise

Lisa Gibbs, Partner and Conveyancing Manager at Simpson Millar LLP, outlines why she believes the changes in stamp duty rules for second properties prompted a rush of borrowing in the final month before the end of the 2015/16 tax year.

Beating the Deadline

When the Chancellor announced changes to stamp duty for second homes – which saw a 3% increase in stamp duty being applied to buy-to-let and other second properties – it was generally accepted that many landlords would rush to beat the deadline rather than incur the additional 3% stamp duty post April. A recent report by the Office for National Statistics (ONS) has given the first indication of the real world results of the stamp duty change, as figures for March highlight an increase in house price inflation and a large jump in mortgage lending.

It is believed that the increased figures for March were a direct result of the stamp duty changes, as Lisa explains:

"Prior to end of the tax year – which was the deadline for the new stamp duty rules – we definitely saw an indication that landlords were trying to beat the deadline as the 3% additional stamp duty would lead to a significant increase in the cost of purchase and reduce the return on a landlord’s investment."

High Lending Figures

Figures published by the Council of Mortgage Lenders (CML) claimed that £13.8billion was borrowed in March, which was 59% more than the amount lent in February.

With Help to Buy ISAs taking off in the months after they opened for business, Lisa explains why so many buyers were keen to borrow before the start of a new tax year:

"With house prices steadily rising, it was no wonder that so many buyers moved before the end of March deadline as many non-landlords were caught in property chains that involved buy to let properties – as a result all purchases had to complete by the end of March to make sure that the long property chains did not fall through. The increase in lending was expected, however the sheer scale of borrowing was surprising, the £13.8billion figure was the highest for any month since August 2007."

The Year Ahead

The result of the EU referendum has created short-term uncertainty in the residential property market – some ongoing purchases may be put on hold while buyers decide whether to commit to a purchase, particularly where they may have concerns on job security and property values. However, the shortage in available properties for sale is likely to ensure that in the mid-term, high demand will continue to fuel continued activity in the property market.

If you are looking for advice on how any potential changes in the upcoming tax year could affect your place in the property market, our expert conveyancing team are on hand to help. Whether you are a first or second time buyer looking to climb the property ladder, or you are looking to sell your property and relocate, our team of experts will handle all of the legal aspects associated with buying or selling a home.

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