The Intermediary – October 2025 - Flipbook - Page 21
RESIDENTIAL
Opinion
Reignite the
housing market, or
risk overheating it?
T
he Conservatives’
proposal to abolish
Stamp Duty on primary
residences has reignited
one of the sector’s
longest-running
debates: whether cuing transactional
taxes can genuinely stimulate the
market, or simply fuel unsustainable
price inflation.
Our analysis of Government
transaction data suggests the impact of
Stamp Duty reform on market activity
is both immediate and substantial –
but not without side effects.
In the six months leading up to the
Covid-era Stamp Duty holiday, the
property market averaged just 58,115
monthly sales as lockdown restrictions
temporarily halted activity. When the
holiday was introduced, the response
was extraordinary. Over the initial
12 months, monthly transactions
surged by 81%. Even as the scheme was
tapered, activity remained high. Once
thresholds reverted to pre-pandemic
levels, sales volumes soened again.
A similar, though less dramatic,
paern emerged during the more
recent zero-rate threshold for
purchases up to £250,000. Between
September 2022 and March 2025, this
partial relief coincided with an average
of 79,479 monthly transactions.
Since April, when we reverted back
to previous thresholds, there has been
a modest but notable decline, to an
average of 72,692 per month.
Bank of England data reinforces
this trend in the way of mortgage
approvals. In the six months prior
to the pandemic holiday, mortgage
approvals averaged 43,802 per month.
That figure then more than doubled
to 89,113 per month before easing
to 71,378 during the tapered phase,
and then 68,276 once the previous
thresholds were reinstated.
However, the more limited relief
for purchases under £250,000 did
lile to improve sentiment amid
higher interest rates. Interestingly,
approvals have risen on average since
April, suggesting that the end of the
partial relief has not hindered activity,
and that interest rate movements
currently play a far greater role in
buyer confidence.
In the six months before the 2020
holiday, average monthly house price
growth across England sat at 0.23%.
During the full holiday, that rate
quadrupled to 0.99%, before cooling
slightly to 0.70% as relief was tapered.
The introduction of the higher
zero-rate threshold brought a period
of relative calm, with monthly
price growth averaging just 0.05% –
evidence that smaller, targeted relief
can create a more stable environment.
Since this April, the monthly rate of
price growth has soened.
Boosting demand
Taken together, these figures paint a
clear picture: full-scale Stamp Duty
relief reliably boosts buyer demand.
The resulting surge in activity pushes
prices higher – great for sellers but
a challenge for affordability and
long-term stability. More limited tax
relief, meanwhile, has lile effect
on sentiment during periods of high
borrowing costs, but can promote a
more measured rate of growth.
If the Conservatives were to form
the next Government and deliver on
their promise, history suggests the
result would be an immediate surge in
activity, as pent-up demand, currently
suppressed by higher mortgage rates,
floods back into the market.
Whether that’s healthy depends
largely on perspective. A vibrant,
fast-moving market means increased
instructions, quicker chains and
MARC VON GRUNDHERR
is director at Benham
and Reeves
greater liquidity. However, such bursts
of activity can quickly overheat the
market, leading to inflated prices,
tighter margins, and a rise in fallthroughs. Of course, fall-throughs
are an unavoidable consequence of
high volume, but the concern is that
removing a major friction like Stamp
Duty could reignite the kind of shortterm inflationary pressures last seen
in 2021, stretching affordability.
Research from Regency Living
shows that, this year, homebuyers
have already paid an estimated
£3.24bn in Stamp Duty. Abolishing
the tax would represent a significant
fiscal decision, forcing policymakers
to weigh the short-term stimulus
against the long-term funding gap.
Yet many in the industry argue that
the trade-off is justified. Stamp Duty,
first introduced in 1694 to finance a
war with France, is one of the most
outdated and distortive taxes in the
property system. It penalises mobility,
disincentivises downsizing, and adds
unnecessary cost to what is already
one of the most financially demanding
transactions most households will
ever face. In a market where buyers
already contend with high mortgage
deposits and elevated mortgage rates,
removing that additional burden
could make a meaningful difference.
Removing Stamp Duty could
reignite market activity and boost
liquidity across the board. However,
it risks fuelling short-term price
inflation and further supply strain,
especially if not accompanied by
measures to increase housing delivery.
For the industry, the prospect of
renewed momentum is welcome. For
policymakers, the challenge lies in
ensuring this does not come at the cost
of long-term stability. ●
October 2025 | The Intermediary
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