UK residential property sales plummeted in July, falling by more than half compared to June when buyers rushed to complete deals before the stamp duty holiday was scaled back.
The number of transactions fell 61.5 per cent in July to 82,110 deals on a non-seasonally adjusted basis from the 213,120 sales the previous month when buyers raced to cash in on a saving of up to £15,000 on the first £500,000 of a property purchase.
Sales were 1.8 per cent up compared to July 2020 when the market was newly reopened after the first nationwide lockdown in the UK.
HMRC said “significant forestalling activity by taxpayers was captured” in June as buyers rushed to complete deals before the Covid emergency tax break was reduced.
“Since then, an expected but noticeable decrease has been observed within provisional July 2021 UK residential transactions statistics,” HMRC said on Wednesday.
UK house price growth cooled in July, growing at its slowest rate since March, the latest Halifax house price index showed, in a signal that tapering the stamp duty holiday has taken momentum out of the Britain’s red-hot property market.
The average value of a home rose 7.6 per cent in July to £261,221 ($358,418) compared with the same month a year ago, slower than the 8.7 per cent annual rise recorded in June.
Chancellor of the Exchequer Rishi Sunak unveiled the stamp duty holiday for buyers in England and Northern Ireland in July last year to prop up the market after its inaction during the first lockdown.
Originally set to expire at the end of March, Mr Sunak extended the tax break until June 30, before it tapered downwards with the zero per cent rate now applying to only the first £250,000 of the purchase price until the end of September.
A separate tax exemption measure in Wales ended in June, while Scotland stopped its own tax break in March.
Such measures caused UK property prices to surge 8.5 per cent last year despite the wider economy being hammered by the fallout from Covid-19, but they were not the only factor driving the increase in prices.
A desire for more space and a new life outside cities inspired many to relocate as the work-from-home trend took off and people became frustrated by being stuck in smaller properties during a series of UK lockdowns.
While the latest HMRC data indicates the market is slowing, property analysts are expecting a rise in purchases from overseas buyers, particularly from the Gulf and wider Middle East region, who can now fly in to view properties after travel restrictions were eased.
London’s prime central property market is set to grow 21.5 per cent over the next five years, said consultant Savills, which upgraded its outlook for the sector to reflect pent-up demand from wealthy overseas buyers.
Savills said its brighter forecast came on the back of the extended stamp duty holiday, as well as wider availability of mortgage finance and the effect of repeated lockdowns on what affluent buyers want from their homes.