The UK housing market is likely to see a spike in activity at the beginning of 2025 as buyers aim to complete transactions before impending stamp duty changes.
A recent Budget announcement means that from March 2025, many buyers will face a stamp duty bill where they previously would not have. This adjustment is anticipated to impact around 20% of first-time buyers.
Overview of Upcoming Stamp Duty Changes
Under current rules, homebuyers purchasing properties under £250,000 do not pay stamp duty, with an elevated threshold of £425,000 for first-time buyers. These thresholds were raised temporarily but will revert to their previous levels in March 2025. As a result, many buyers may rush to complete purchases early next year to avoid the higher tax burden.
High Interest Rates Continue to Limit Demand
Despite the anticipated surge in early 2025, high interest rates are likely to temper the overall increase in market activity. With affordability already stretched due to elevated rates, the changes are not expected to have as significant an impact as previous stamp duty revisions in 2016 and 2020. Buyers are being more cautious in response to the current interest rate environment, limiting overall demand.
Regional Differences in Impact
The impact of the stamp duty change is expected to vary across regions. In areas where house prices are lower, such as Northern Ireland and parts of northern England, the changes will likely be less significant. However, regions with higher property prices, including London and the south-east of England, may experience a more noticeable effect.
Future Market Expectations
Real estate experts believe these upcoming changes will prompt many buyers to move quickly on their purchases, particularly those considering finalising transactions before the end of the year. However, a potential decline in mortgage rates in 2025 could play an even larger role in stimulating the market than the stamp duty adjustments alone.
Current Property Market Trends
As of October 2023, the average UK house price reached £265,738. Although prices remain below their 2022 peak, they have slowly risen over the past year, supported by a gradual decline in interest rates. While an increase in sales is anticipated early next year, past stamp duty changes suggest that this boost may be short-lived, with a potential slowdown in activity following the initial surge.
With these upcoming changes to stamp duty and fluctuating interest rates, the early months of 2025 will be a critical period for the UK housing market, shaping the year ahead for buyers and sellers alike.