Prime Market Well Positioned To Brush Off Stamp Duty Holiday Cliff Edge

The market cliff-edge associated with the end of the stamp duty holiday was unlikely to have a significant impact on the UK’s high-end property sector, according to research from Enness Global Mortgages.

A downward correction in property prices and transaction levels had been expected following the original expiry of the stamp duty holiday, with early signs of a slowdown emerging through a drop in mortgage approvals during February.

However, the Government’s decision to extend the stamp duty holiday until September for some homebuyers helped sustain market activity and delayed any potential cliff-edge.

Enness Global Mortgages analysed buyer sentiment and found that the impact of the stamp duty holiday was likely to be felt far more significantly across the mainstream market than at the top end.

The research showed that 39% of recent homebuyers with a household income of up to £34,999 were motivated by the stamp duty holiday. The same proportion of buyers earning between £35,000 and £69,999 said the tax saving had influenced their decision to purchase.

This fell to 16% among those with household incomes between £70,000 and £99,000, while just 6% of buyers earning £100,000 or more said the stamp duty saving was a key motivation.

A similar trend was seen when considering the impact of record-low interest rates. Around 80% of buyers earning up to £69,999 were motivated by low borrowing costs, compared to 14% of those earning between £70,000 and £99,999. Just 8% of buyers with household incomes of £100,000 or more identified low interest rates as a key factor behind their purchase.

Despite the Government’s backing of 95% mortgage products, there were also signs that some lenders were reducing the range of products available and tightening their lending criteria, particularly for borrowers with less predictable incomes or those heavily reliant on commission.

Among recent homebuyers earning up to £34,999, 22% said they had struggled to secure a mortgage at a competitive rate of interest. This was also the case for 19% of those earning between £35,000 and £69,999.

In contrast, just 4% of buyers earning between £70,000 and £99,999 reported difficulties securing a suitable mortgage rate, highlighting the stronger financing options generally available to higher-income borrowers.

Enness Global Mortgages found that lower tiers of the market were more dependent on both stamp duty savings and favourable mortgage rates, meaning the eventual withdrawal of these incentives could have a greater impact on transaction levels.

At the same time, the high-end market had been building momentum independently of the stamp duty holiday. Buyers operating at higher price points were less likely to be motivated by tax savings and were generally in a stronger position when arranging property finance.

As a result, while the mainstream market faced the prospect of a slowdown following the eventual end of the stamp duty holiday, the high-end sector was expected to demonstrate greater resilience and continue its more gradual return to normal market conditions.