Stamp duty receipts hit record high as UK property market begins to cool

Homebuyers in England and Northern Ireland paid more stamp duty in the three months to September than in any quarter on record, but property market analysts have warned the trend will reverse at as house prices fall.

Receipts from stamp duty on residential properties hit £3.59billion in the third quarter, beating the last quarterly record, set in the second quarter, by 21%, according to government figures released on Tuesday.

In the year to September – a boom period characterized by strong demand and soaring property prices – receipts topped £12billion. That’s 28% higher than their pre-pandemic 12-month high of £9.47billion set in 2017.

Lucian Cook, research director at estate agent Savills, said the rise was driven by “very strong activity at the high end of the market”. There was a 35% increase in purchases over £1million in the third quarter compared to the same period in 2021.

Cook pointed to the contribution to the total from rental and second home buyers, who are forced to pay an additional three percentage points in stamp duty. This delivered £528m to the Treasury over the period.

Stamp duty benefits introduced by then Chancellor Kwasi Kwarteng on September 23 were among the few items in his ill-fated ‘mini’ budget to be spared by his successor Jeremy Hunt.

Kwarteng doubled the threshold at which stamp duty would start to apply in England and Northern Ireland to £250,000. First-time buyers were also exempt from paying tax on the first £425,000 of their purchase, up from £300,000 previously.

Cook said the disproportionate contribution of high-end purchases to tax revenue partly explains the government’s willingness to leave the changes in place. “That’s one of the reasons they were able to have a giveaway in the ‘mini’ budget, and why they didn’t turn it around. Giving at the low end isn’t hugely expensive. .

Government figures did not break down tax receipts by price bracket, but Cook estimated that almost 40% of stamp duty receipts in the third quarter were accounted for by purchases of more than £1million, although they accounted for less than 5% of transactions.

The Treasury faces lower stamp duties in the coming months, however, as higher mortgage costs limit buyers’ aspirations, property prices are under pressure and the number of transactions is expected to decline. In his forecast this week, Savills said house prices would fall by 10% next year and transactions by a quarter.

Roarie Scarisbrick, partner at buying agency Property Vision, said market sentiment had cooled quickly after the ‘mini’ budget, although there was still evidence of demand, particularly in the high end.

“Everyone is on edge. There are still transactions, but I think everyone has calmed down very quickly in terms of values ​​and prices,” he said.