A striking change will happen at the start of April 2025: stamp duty thresholds will be lowered from £425,000 to £300,000 for first-time buyers and £250,000 to £125,000 for second-time buyers. Reversing the stamp duty thresholds set in September 2022 is going to have a noticeable impact on the performance of the property market.
Given this impact, it is worth exploring the ramifications that the lowered stamp duty thresholds will have in shaping the property market.
How Has This Deadline Already Impacted the Property Market?
A useful starting point is to highlight the consequences that the lowered stamp duty thresholds have already achieved since its announcement in October 2024. In the most recent survey conducted by GetAgent.co.uk, 47% of agents recorded seeing a heightened sense of urgency motivating buyers to acquire property before the April deadline.
Feeling alarmed that the lowered stamp duty thresholds will constrain participation in the property market, 15% of agents recall seeing their customers offer more money than expected relative to the initial asking price in order to purchase the property before April.
Colby Short, CEO of GetAgent.co.uk, argues that ‘a heightened level of buyer activity will inevitably drive both transaction volumes and house prices upwards, leaving many agents reasonably concerned about a potential market correction once the deadline passes.’
What second-time buyers have already felt is the increased stamp duty surcharge from 3% to 5% that started on 31 October, with the Chancellor Rachel Reeves arguing that it would ‘support over 130,000 additional transactions from people buying their first home, or moving home, over the next five years.’
Yet Jonathan Stinton, head of intermediary relationships at Coventry Building Society, disputes the Chancellor’s belief that it would benefit first-time buyers, arguing that ‘homebuyers are paying more and more to the taxman and it’s only going to get worse from April when the thresholds change, and stamp duty bills are hiked again.’
As such, we can already see the ramifications of the April deadline manifesting in a hike in property sales over the past quarter, driven by alarm that the lowered stamp duty thresholds will inhibit property acquisition incentives.
What to Expect from April Onwards?
In the same GetAgent.co.uk survey, a staggering 47% of agents predict that property transaction levels in the immediate months following April will decline. This is in conjunction with a further 45% of agents expressing concern that house prices will likewise dip during the same period.
Take the following as a case example: a first-time buyer purchasing a property worth £625,000 pays £10,000 in stamp duty costs under the current stamp duty thresholds. From April, however, a first-time buyer will pay an average of £21,250, which amounts to an increase of £11,250.
A broader view conducted by the Office for Budget Responsibility shows that property buyers are set to pay £18.1 billion by 2030, up from nearly £13 billion in 2024. Seen from another angle, homebuyers will pay an additional 40% more in stamp duty by the end of the decade. These figures represent a significant increase in expenditure for the average homebuyer.
For these reasons, Arjan Verbeek, chief executive of Perenna, argues that the ‘higher stamp duty will do nothing but add more friction to the housing market, and hammer first-time buyers at a time when we are already in the midst of an affordability crisis.’ Verbeek adds that the lowered stamp duty thresholds will have a ‘domino effect all the way down to the bottom of the market’ that will ‘disproportionately’ affect first-time buyers.
A temporary fall in property transactions is likely to occur during the second quarter of 2025 at a time when the market will be adjusting to the new stamp duty thresholds. Yet as long as the overall market conditions continue to improve, the expected contraction is likely to be brief.
As Nationwide Economist Robert Gardner observes, ‘providing the economy continues to recover steadily, as we expect, 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.’
What Shift is to be Expected?
Despite the general expectation that the lowered stamp duty thresholds will not radically change the landscape of the property market, the long-term ripple effects remain to be seen. For the increased expenditure for acquiring property – whether as a first-time or second-time buyer – will invariably influence the activity of the property market.
It will likewise influence the performance of regional markets, as a homebuyer considering property in Southern England or London will most likely have to reserve money for the high stamp duty costs. As a result, the lowered stamp duty thresholds are likely to shift the activity of regional markets, with Northern England and Scotland becoming more attractive places for buying property.
