Charting the recovery: a bit of context
The Council of Mortgage Lenders released their “Ten snapshots of an improving mortgage market” the other day and while there is no doubt that 2012 showed the biggest improvement in market activity since the credit crunch, I thought it would be useful to present the first two charts again with some pre-crunch data and without cutting the y-axis.
2012 saw 932,000 transactions which is a 5.5% improvement on 2011 but is still only 60% of the 2000-07 average
Meanwhile, first time buyer mortgage completions (year to Nov 2012) increased by 12% in the year driven by the end of the stamp duty holiday in March and an increase in market activity during November (my analysis on the impact of stamp duty holidays on market activity).
However this is 58% of 2003-07 completions and only 42% of average completions during the period 1993-2002 when affordability was not stretched.
HMRC Transactions: Highest number of transactions for year-to-date since 2008
Following a much stronger level of transactions in Oct, the total number of residential transactions for the year-to-date is the highest since 2008.
Lowest no. of transactions (76k) in Sept since 2008. Annual level is holding up at 926k.
The impact of stamp duty holidays on market turnover
Since the house price crash of 2008/09 and the collapse of housing market turnover due to the effects of the credit crunch on mortgage lending and constrained deposit affordability; there have been two periods when stamp duty has been suspended for transactions meeting certain conditions:
- From 3rd Sept 2008 to 31st Dec 2009, stamp duty was suspended for all residential property selling for up to £175,000. Both before and after the suspension, a 1% rate was set for all property selling for more than £125,000.
- From 25th Mar 2010 to 24th Mar 2012, there was no stamp duty for transactions priced up to £250,000 for first time buyers.
Given that the aim of these measures was to reduce the overall purchase cost and increase accessibility and hence market turnover, what was their impact on the market?
There is less evidence of a general increase over the period of the stamp duty holiday. During the first holiday period, transactions probably remained weak due to wider market conditions until the later stages but then picked up. During the second holiday period, there is some evidence of increased turnover during the early stages but across the majority of the period there is limited evidence of an increase in transactions.
The total impact across the two holiday periods is summarised in the table below and as we can see that the net result was to increase transactions by approximately 13,000 during the first holiday and 7,000 during the second holiday.
From these results it would suggest that stamp duty holidays have only a minor impact on increasing transactions (which is no surprise given that deposit affordability is the biggest to constraint in the market) and there would appear to be little benefit in holding the tax break over a longer time frame.
Note: I have used the Council of Mortgage Lenders’ data on the distribution of property valuations for new mortgages because it allows me to split out first-time buyers. I estimate that the number of mortgages reflects ~80% of stamp duty liable transactions at lower price bands.
Residential property transactions pick up in August
Following a relatively weak July, the initial data from HMRC shows that UK housing transactions rebounded during August to the highest level for that month since 2007.
Additionally, data on stamp duty land tax shows that the high level of receipts in July has continued into August.
Stamp duty land tax receipts are up in July but transactions remain weak
UK housing transactions holding up (compared to recent years)
Housing transactions as measured by HM Revenue & Customs are holding up despite the ending of the stamp duty holiday.