Resolution Foundation’s quarterly Housing Outlook suggests that other factors such as higher savings, falls in mortgage rates are the most likely reasons behind the significant price rises
During the recent house price boom, the value of an average UK home rose by 13.2 per cent between June 2020 and June 2021, but this was not due to the stamp-duty holiday as previously thought, according to data from the Resolution Foundation’s quarterly Housing Outlook.
The report suggests that other factors such as higher savings, changes in housing preferences and circumstances, and falls in mortgage rates are the most likely reasons behind the significant price rises, rather than the stamp-duty holiday.
The report also suggests that had house price increases been due to a stamp-duty tax break, higher growth rates in areas with most significant tax breaks would have been expected. For example, in England houses priced at around £500,00 and in Scotland and Wales homes worth £250,000 were expected to be most affected. Instead, local authorities saw the biggest price increases where savings due to the tax holiday were negligible.
Krishan Shah, Researcher at the Resolution Foundation, said: UK house prices have boomed over the past year, and many have pointed the finger at the stamp duty holiday as the main cause. But the evidence doesn’t support this popular claim. It now seems that other factors, such as higher savings and changing housing preferences, may have been more or equally important.
The problem with the stamp duty holiday isn’t that it caused a house price rise, but that a boom in transactions and prices would almost certainly have taken place without it, he said.
In England and Northern Ireland alone, the stamp-duty holiday is estimated to cost £4.4 billion in forgone taxes by the end of 2021/22 with Shah commenting that the tax break begs big questions about value for money.
