Will house prices drop after stamp duty increase?

[topsocks]

Will houses currently on the market have to lower their asking price because of the stamp duty increase?

I can't see improvements being made to the COL for most people. It's not a crisis but a permanent situation. If Labour actually does something for leaseholders, that would be an excellent thing.

This. Over time bricks and mortar are a good solid investment.

That's certainly been the case for the majority in the last 40 years but it isn't what @topsocks actually asked. When you buy for the first time makes a massive difference. We can't go back to 1990 and all by then!

I personally find stamp duty quite crippling & we would have moved but instead we are staying put for longer to skip a stage & may just extend & stay put.

For non-first time buyers buying a house over £250k, the stamp duty increase is £2,500. So even if prices drop, it won't be a significant amount.

it's much less than that - in the worst case scenario an FTB could have bought a property up to 425k without paying stamp duty, but now they'd pay about 6k on a 425k property.
But that's a pretty expensive property for an FTB and only really likely to impact quite a small number of people at that level. And as with the other example I used, if someone offered 420 when they might otherwise have offered 425, that's just in the margins of variability, not really a case of "property prices falling".

I think stamp duty is too high but that's a greedy RR for you.

No, I don't think so. I think the deadline maybe placed a bit of false urgency on people to move quickly when actually the amount of money in question is relatively small.

I think interest rates are the biggest issue and also vendor's ability to buy their onward purchase at a reduced price. For as long as the vendors feel like they can't do this then they are much more likely to prefer to wait to sell and hold firmer on their price.

I'm looking to buy soon and on a house of £475k there's only about £3k difference in stamp duty before and after the rise. I wouldn't expect a seller to reduce to account for that. That said, we are budgeting between £20-£25k for solicitors fees, estate agent fees and stamp duty. The cost of moving is eye watering.

it's much less than that - in the worst case scenario an FTB could have bought a property up to 425k without paying stamp duty, but now they'd pay about 6k on a 425k property.
But that's a pretty expensive property for an FTB and only really likely to impact quite a small number of people at that level.

Yes, we're in the process of moving at the moment and our buyers are FTBs. We won't complete before 1st April (because they have been painfully slow!) but the sale price is £350k, so I think they'll have to pay £2,500 in stamp duty that they otherwise wouldn't have had to pay.
Obviously that's not nothing but equally it's not going to make house prices fall that much.

Yes it will act as a downward pressure on prices.

House prices are a function of peoples ability to pay for them. Reduce the amount of money people are able to pay (via stamp duty) and the effect will be to bring prices down. Unless you believe people can magic money out of nowhere. A lot of people stretch themselves to the limit when buying a house. It's not possible to stretch yourself beyond the limit.

OTOH the effect may well be masked by other factors, such as wage inflation and mortgage rates.

House prices are very sticky though and it could take a long time for such effects to appear in the market. ie see more threads along the lines of "why is my house not selling" the answer nearly always being because it is overpriced.

No, I don't think so.

And it's probably very location dependent, but I don't think FTB needs more incentivising, either - there are loads of them here.

It's not magicing money from nowhere. For a house worth £250k, stamp duty is an extra £2.5k on what it was before... realistically, not many people are moving without that in a contingency fund, or someone you could ask for it. Friends of ours have just found out that they won't complete in time, and her Dad has offered to cover the increase. We just missed out during Covid and had to decimate our savings, but we could still afford it, and I'd be surprised if many people made the move more brassic than we were! We'd invested a lot by that point and I was 12 days away from giving birth.

It may affect some unpopular properties, but I doubt there'll be any noticeable effect on the market as a whole. When there is such high demand and low supply of homes, a relatively small change (compared to the total cost of buying a house) isn't going to have much of an impact. Maybe when we start building the millions of new homes needed!!

So in other words, "people will always be able to pay more for something because they can always find more money from somewhere".

If they don't someone else will. It will always be that way whilst supply is far less than demand. The houses that don't sell usually have something fundamental wrong with them, such as being grossly over-priced, subsidence, neighbours from hell clearly living next door, council tip over the back fence, etc.

Also if you think about it, a lot of this is just money being recycled. The older generation that own property will end up giving the money that they have made on the property to their adult children either before or after their death. The adult children will often use this money to buy their own house or give it to their children to buy a house. It's not necessarily all 'new' money being pumped into the housing market but money being moved from one property to another through different generations.

Minus the increased amount of money taken out by stamp duty of course.

That’s how it worked in our family. Though the money sometimes comes from grandparents to grandchildren re FTB deposits as in our case.

Very very hard on FTBs who don’t get family financial support but that’s another thread!

It's certainly becoming more common for grandparents to give more to their grandchildren, either whilst alive or in their wills.

A lot of the older generation understand the pressures facing the young and haven't fallen for the Daily Mail rhetoric of claiming all youngsters are lazy and spend all their money on Starbucks and phone contracts!

Definitely not. My parents have never been anything but sympathetic to how hard it is for their grandchildren & young people in general these days to buy their first property.

Yes, and some are making deeds of variation so that some of the money that would come to the parents from a grandparent dying, instead goes straight to the grandchildren for house deposits or other life essentials, such as rent deposits, childcare, financing a reliable car for work, etc.

It is bad luck for those who don't have family who can do this, I agree.

It is bad luck for those who don't have family who can do this, I agree.

Its not particularly motivating that for many it's what you inherit/have help with as opposed to salary/inheritance

Where I live, it feels like estate agents made a massive push at the end of Jan to the middle of Feb and almost everything that had been languishing on the market for many months suddenly sold in the space of three weeks. Probably achieved these sales by encouraging offers: “it will be ten times harder once stamp duty changes.”

But I think that’s probably it now. The market will probably just stagnate.

What is more likely to have an effect on the market this year is our economy being terrible and inflation rising in the second half of this year. I think a lot of stuff is going to hang around for a long time - again.

I am seeing a lot more realistic pricing occurring this year for the first time though (well, in three years of watching).

Unless you're in negative equity it doesn't matter because you sell lower and you purchase lower. It's all relative.

In Scotland stamp duty (land reform tax) is already higher and by a considerable way.
In our area it means the houses at the upper end of the scale are take longer to sell and often way under the asking price, the same with houses which are on the cusp of bracket to get it under e.g. 325k goes to 10%.
The houses which are good in the lower brackets are selling quickly though.

It does depend a lot on your local market to what it is doing.