And given the rampant rise in activity last year, some degree of deflation seems nailed on. The rate of sales price growth reached a six-year high of 7.3 per cent in December, according to the Nationwide House Price Index, rounding off six consecutive months of jumps in the rate of annual price growth.
Demand shows no sign of slowing yet - November mortgage approvals for new home purchases rose to the highest level since summer 2007, according to the Bank of England’s (BoE) latest money and credit data. The structural supports are there for the pace in sales price growth to continue in January and February. In addition to the stamp duty break, the average effective interest rate on new mortgage borrowing was 1.83 per cent in November, according to the BoE, an uptick on the prior month but still historically very low.
Yet in using such a blunt instrument to fend off an anticipated downturn in the housing market and spark some life into the economy, the government may have created a more extreme pressure point this spring. Unemployment is expected to jump this year, peaking at 7.5 per cent of the working age population in the middle of 2021, according to forecasts from the Office for Budget Responsibility. That forecast did not take account of the extension of the furlough scheme to the end of April but, as England enters its third national lockdown on the heels of the other home nations, there is yet to be an announcement on it being expanded further still. Alongside the March stamp duty deadline there are policy restrictions, chiefly the closure of the help-to-buy scheme to all but first-time buyers.
Industry bodies, including the Home Buying and Selling Group, have written to the government to consider an extension to the deadline to help process the surge in transactions - a plea, so far, in vain. A spokesperson for the Treasury argues that the “time limited nature” of the tax break is what has encouraged people to take advantage of the scheme.
Beyond creating a cliff-edge, the part played by the stamp duty break in pushing up house prices has also exacerbated affordability issues. Campaign group PricedOut argues the break has blunted one of the core advantages for first-time buyers - who already did not have to pay the tax on properties up to £300,000 - over second-movers and buy-to-let investors. It proposes that stamp duty should be rolled into a monthly property tax based on the value of the home, paid by the owner of the property, which would result in the tax liability being priced into what people would be prepared to pay for a home.
Will spending an estimated £3.3bn on a temporary tax break prove to be the most effective use of government funds in boosting the economy? It looks unlikely.
