The stamp duty threshold falling next year will lead to more sales in the first quarter of 2025 as buyers attempt to avoid the tax, a major building society has said.
In Nationwide’s House Price Review and Outlook for 2025, Robert Gardner, the mutual’s chief economist, said upcoming changes to stamp duty were “likely to generate volatility” as buyers brought purchases forward.
From 1 April next year, the nil-rate threshold for stamp duty will fall from £250,000 to £125,000 for residential purchases and from £425,000 to £300,000 for first-time buyers.
Gardner said this would “lead to a jump in transactions in the first three months of 2025, especially in March, and a corresponding period of weakness in the following three to six months, as occurred in the wake of previous stamp duty changes”.
He added: “This will make it more difficult to discern the underlying strength of the market.”
Toby Leek, president of NAEA Propertymark, agreed, saying the trade body’s members reported an “increasing interest in property” with sales higher than the usual winter lull.
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Leek added: “Buyers and sellers in England and Northern Ireland are looking to complete their home move before the stamp duty changes commence from April 2025, and it’s expected that, coupled with slow increases in affordability and wages, this spike of momentum in mortgage approvals and housing market activity will continue.
“After this spike, buyers and sellers with time on their side may then reap the rewards of a slower-paced market to ensure each step of their house move is fully considered.”
Steady housing market activity
Gardner said as long as the economy continues to recover steadily as expected, “the underlying pace of housing market activity is likely to continue to strengthen gradually as affordability constraints ease through a combination of modestly lower interest rates and earnings outpacing house price growth”.
The mutual predicted house prices would rise by around 2% to 4% next year.
Estate agent Chesterons made a similar prediction, saying property prices would increase by 3.4% across the UK and 3% in London next year. The firm said this would be supported by lower mortgage costs, “modest but consistent” growth in the economy, and inflation staying around the 2% target.
A ‘surprisingly resilient’ 2024
Gardner said the mortgage market and house prices remained “surprisingly resilient” this year despite affordability challenges.
He added: “At the start of the year, house prices remained high relative to average earnings, which meant the deposit hurdle remained high for prospective first-time buyers, a challenge that had been made worse by record rates of rental growth in recent years, which has hampered the ability of many in the private rented sector to save.
“Moreover, for many of those with sufficient savings for a deposit, meeting monthly payments was a stretch because borrowing costs remained well above those prevailing in the aftermath of the pandemic.”
He said it was “encouraging” that activity in the housing market rose over the year, adding: “The number of mortgages approved for house purchase each month rose above pre-pandemic levels towards the end of the year.”
“Similarly, after starting the year registering small annual declines, the pace of house growth moved firmly into positive territory, approaching 4% in November,” Gardner said.
