Market activity has taken a noticeable turn. Most metrics indicate that buyer activity has dipped since the introduction of new stamp duty thresholds starting in April 2025. By placing first-time buyer stamp duty thresholds at £300,000 (previously £425,000) and second-time buyer stamp duty thresholds at £125,000 (previously £250,000), it has discouraged customers from participating in the property market, aware that there will be additional financial costs to consider even for mid-range properties.
Stamp Duty Effects
Since April 2025, the number of customers subject to stamp duty has doubled from 21% to 42%, which would produce an additional £1.1b in annual tax revenue for the Government. For a four-bedroom detached Hartford-style property in Longridge valued at £381,995, the stamp duty would cost £4,099 for a first-time buyer and £9,099 for a second-time buyer.
This enlargement of the number of customers subject to stamp duty has already had a major effect. Recent figures published by HM Revenue and Customs showed that property transactions dropped from 177,440 in March to 64,680 in April, a 64% decline in the overall volume of property transactions.
Such figures were, it should be noted, driven in large part by the urgency to complete the property transaction prior to the April deadline. Toby Leek, president of NAEA Propertymark, said: ‘The increase in Stamp Duty thresholds sparked a flurry of mortgage lending in the first quarter of 2025 due to people rushing to avoid paying higher rates of Stamp Duty across England and Northern Ireland’. ‘It was always inevitable’, Leek concluded, ‘[that] there would be a post threshold slow down as an aftereffect.’
Yet the scale of this slow down has caused alarm among industry experts. There is genuine concern that the UK property market may confront affordability challenges if left unabated. Paula Higgins, CEO of HomeOwners Alliance, said: ‘Stamp duty is acting as a handbrake on the housing market. When a family faces a £10,000 stamp duty bill just to move to a £400,000 home – before they’ve even paid for surveys, legal fees, and removal costs – it’s no wonder a quarter of potential movers are staying put.’
Viewed from this angle, then, the lowered stamp duty thresholds are compounding the affordability issues many customers are currently facing.
Affordability Challenges
More than 800,000 homeowners shelved moving due to stamp duty, the HomeOwners Alliance found in a recent survey identifying the present issues homeowners face. The top five most mentioned reasons for not moving are the following: 35% due to house prices, 35% due to the stress of moving, 28% due to moving costs, 27% for the lack of suitable housing, and 24% due to stamp duty.
Higgins observed: ‘Our research reveals a housing market in crisis – not because people don’t want to move, but because they simply can’t afford to. With over 800,000 homeowners shelving their moving plans, we’re seeing families trapped in unsuitable homes, unable to upsize for growing children or downsize as they age.’
Despite property prices falling by 0.4% in May after a 0.3% increase in April, the increases in cost of living continue for many customers to fall behind property price growth. Halifax has identified that house prices are 2.5% higher now than they were a year ago, albeit falling behind the expected 3.0% rise forecast from the Reuters poll.
Although Halifax considered the UK property market to be ‘broadly stable’, some property analysts point out that the market may be strained if buyer activity continues to slide downwards – a scenario which must be considered when looking at the declining purchasing metrics.
Amy Reynolds, head of sales at Antony Roberts, said: ‘The key challenge [for the property market] is affordability – mortgage rates, higher stamp duty and for some, the increase in private school fees, is affecting many families who would like to move but are unable to’.
As such, the imposition of lowered stamp duty thresholds has emerged at a time when broader economic trends have been constraining the property market. The additional stamp duty costs are making acquiring property more daunting, which has, in turn, exacerbated the financial hurdles customers are currently confronting.
Present Market Conditions
A series of economic factors has resulted in the property market slowing down since April. Yet interest rates continue to decline and product supply continues to grow, two critical features in encouraging buyer activity. Those are unlikely to be significantly affected. While consumer confidence has taken a hit since April, with the economic conditions inhibiting, rather than supporting, the property market, the worst effects of the stamp duty thresholds should gradually level out over the remainder of the year.
Nevertheless, it is crucial to acknowledge that the lowered stamp duty thresholds have impacted purchasing patterns, and it is reasonable to expect that it will play a greater role in assessing property desirability for customers compared to pre-April thresholds.
