New research from Zoopla shows that 28% of these estimated 4.3 million properties have now moved above the initial £125,000 stamp duty threshold in England and Northern Ireland. In Wales and Scotland, rising house prices also mean that a further 360,000 homes have been pushed across the initial threshold at which stamp duty becomes payable (£145k in Scotland, £180k in Wales).
This is due to an increase in average UK house prices which have risen £29,000, or 13% since the beginning of the pandemic in March 2020 - including a rise of 8.3% in the last year alone. The increase in house prices is almost equal to the current national average annual salary of £31,096, as prospective buyers continue to simultaneously grapple with increased living costs around the country.
But despite a tumultuous economic backdrop thanks to the pandemic, there have been consistently high levels of buyer demand over the last two years, set against constricted supply, which has contributed to the overall increase in UK house prices. This demand has been reflected by HMRC who revealed that - despite the stamp duty holiday in 2021 - stamp duty receipts in England and Northern Ireland reached £18.6billion in the year to March 2022, an increase of £6.1billion on the previous year.
First-time buyers require thousands more to purchase their first home compared to two years ago
Rising house prices are also having a huge effect on those keen to get their foot on the property ladder. First-time buyers are now spending an average of £225,000 to buy their first home - an increase of £27,000 compared to just two years ago.
This means that this group of prospective buyers now require an additional £4,000 for a deposit, despite average annual earnings increasing by only £2,704 over the last two years. They also need an additional £5,000 in annual household earnings or income in order to secure a mortgage, which equates to £417 per month.
‘Hotspots’ of increased housing supply beginning to emerge
The demand for homes remains high at 58% above the five-year average, in part due to ongoing pandemic-related factors including the option of flexible and hybrid working for office workers. This is causing some buyers to reassess their home needs and in turn, is driving property demand. However, there are increasing signs that the supply of homes for sale is starting to rise with the flow of new supply up 3% on the five-year average.
This comes as clear ‘supply hotspots’ are beginning to emerge for buyers looking for more choice. In these markets, there has been a notable uplift in supply coming onto the market over the last month which will help to offset the high demand and give buyers more choice.
These areas include Erewash in the East Midlands which has seen a 45% increase in properties available for sale over the last month, followed by Pendle in the North West (+38%) which lies close to both the Forest of Bowland and the Yorkshire Dales - both Areas of Outstanding Natural Beauty - and Elmbridge in the South East (+38%).
City centres also continue to experience demand as workers return to offices and both pent-up domestic and international demand for city living increases. In London, Kensington & Chelsea has seen the biggest increase in homes listed for sale over the last month, with average house values up just 2.1% on the year. This compares to a 3.4% increase in Greater London, 8.2% in Birmingham and 9.5% in Manchester.
Gráinne Gilmore, Head of Research, Zoopla, comments: “Buyer demand has been very strong ever since the end of the first lockdown in 2020, and the start of this year has been no exception. This demand, coupled with constrained levels of supply has put upward pressure on pricing - with the average property now worth an additional £29,000 compared to March 2020.
"This has pushed millions more homes into higher stamp duty brackets, meaning that if they come to market, there is an additional cost for buyers.
"While homeowners who make a move will see the benefit from increased property values when they sell, new entrants to the market will have to find additional finance to fund a move - meaning the reliance on the ‘Bank of Mum and Dad’ is likely to increase among first-time buyers. It also highlights the importance of first-time buyers having access to mortgage deals with smaller deposit requirements if they can meet the criteria for all other aspects of a mortgage loan.
"However, for some buyers, there is good news as we have identified areas where there has been a notable rise in the supply of homes being listed for sale in the last month - giving potential purchasers more choice in areas such as Pendle in the North West, Elmbridge in the South East and the new city of Southend-on-Sea on the East England coast.”
Chris Druce, senior research analyst at Knight Frank, comments: “While supply is now building, demand in the country market remains elevated. With headwinds building, the spring market represents a window of opportunity for both buyers and sellers.
“Supply ‘hotspots’ in the rural and semi-rural market include Stow on the Wold in the Cotswolds, where new instructions are up 82% in the four weeks to 27 April versus the five-year average; Hazelmere (up 61%); Winchester (up 54%); Oxford (up 47%) and North Surrey’s popular commuter town Esher (up 45%)."
