0:02 AM, 20th December 2024, About 7 hours ago
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Budget uncertainty and the stamp duty hike are set to cast a shadow over the housing market in 2025, says Knight Frank.
The estate agents say the stamp duty hike from April next year will mean more people will face higher bills when purchasing properties above the new thresholds.
From April 2025, stamp duty thresholds in England will be lowered. For first-time buyers, the exemption threshold will drop from £425,000 to £300,000, while for standard residential properties, it will fall from £250,000 to £125,000.
Tom Bill, head of UK residential research at Knight Frank, says the housing market could experience a rough start in the first few months of 2025.
He explains: “If you wanted to place a bet on the future of the UK housing market, the first few months of 2025 would not be a good time.
“Consumer confidence will be brittle, President Trump will have just taken office and tax deadlines may artificially inflate demand. Meanwhile, bond markets will still be processing October’s Budget as more economic data is released.
“The reassessment of the market follows a rise in mortgage rates triggered by the Budget, which saw the government’s financial headroom narrow, and the risk of inflation increase.
“The Budget targeted the private sector more aggressively to fund the public sector with measures that included a hike in employer national insurance and a rise in stamp duty surcharge from 3% to 5% for landlords.”
According to Knight Frank, stamp duty changes in April will cause bills to rise by up to £2,500. For first-time buyers, this could mean an additional £6,250 in stamp duty charges.
The estate agents also report that mortgage approvals reached an 18-month high in October, partly driven by buyers aiming to avoid the April hike.
Knight Frank predicts that, based on the experience of the stamp duty holiday during the pandemic, March will be a busy month, followed by a lull in April as buyers rush to secure properties before the stamp duty increase takes effect.
Despite the cautious outlook, Savvas Savouri, chief economist at QuantMetriks, believes the private sector will adjust by taking “evasive action.” He argues that this will lessen the impact of the tax hikes announced in October, including those on stamp duty and inheritance tax.
According to Mr Savouri, such actions could include individuals transferring more housing equity to their children during their lifetime or businesses relying more on self-employment.
Mr Savouri says: “The reality is the Exchequer will not raise as much as the Chancellor claims it will from her Budget and the economy will not be affected by new fiscal policy anywhere near as much as many would have you fear.”
