David Smith, the economics editor of The Sunday Times, writes in Show House magazine about the impending changes to Stamp Duty and the impact it could have on both buyers and developers.
It is there in black and white on the government website, and it seems innocuous enough. From 1 April 2025, it says, the stamp duty land tax (SDLT) rate on transactions up to £125,000 will be zero, rising to 2% on the portion between £125,001 and £250,000, 5% between £250,001 and £925,000, 10% from £925,001 to £1.5million, and then 12% above £1.5million (they don’t bother with the odd £1 at those levels).
There is a useful calculator alongside the SDLT table, which tells me that, based on the official house price index’s average house price in England in December, £291,000, the stamp duty bill if my purchase is completed on 1 April would be £4,550.
Completing on that day would, however, be a bit of an April Fool’s thing to do, for if the transaction could be done a day earlier, on 31 March, the bill would be £2,500 less at £2,050.
You will have guessed that we are coming to the end of what has been quite a long series of stamp duty concessions, beginning with Rishi Sunak’s decision in July 2020 to extend the nil rate band to £500,000, in order to help the housing market through the pandemic. It may seem quite recent, but we are now on to our fourth chancellor since then, and Sunak himself has been in and out of 10 Downing Street.
The most recent concession was the product of Liz Truss’s short-lived premiership, and Kwasi Kwarteng’s only budget, in September 2022, perhaps the only thing that is left of that rocky period. That budget lifted the nil-rate threshold from £125,000, where it had returned after Sunak’s temporary increase, to £250,000, until April 2025.
That, then, is what is happening very shortly, and many buyers appear to be fully aware of it. The latest residential market survey from the Royal Institution of Chartered Surveyors suggested that sales activity levelled off in the early months of this year, against recent trends.
The RICS survey showed that the balance for new buyer enquiries has dropped to zero “with measures of demand and sales both easing slightly to now sit in neutral territory”. Though respondents to the survey still expect a pick-up in activity later in the year, the slowdown in demand looks to be a clear result of the coming rise in stamp duty in April. Transactions getting underway now will be too late to benefit from lower stamp duty bills.
Readers will remember these temporary peaks and troughs as a result of stamp duty changes in recent years. Sunak left it late to extend his stamp duty reduction. There were hopes that Rachel Reeves would extend the current concession, but it now looks too late for that.
These wobbles do not change the big picture, which is still of a recovering market, which will benefit from lower mortgage rates. And, as Anthony Codling, housing market analyst at Royal Bank of Canada Capital Markets, points out, there is still plenty of underlying strength for housebuilders.
“Due to lead times, the new build sector is shielded from the biggest waves caused by the stamp duty holiday, but the housing market typically pauses for breath immediately after a stamp duty holiday and downbeat post-holiday headlines may weigh on share prices,” he says.
“However, the tonic to these headwinds will be the health of housebuilders’ sales rates and order books, which provide a better guide for performance than changes in stamp duty rates.”
It is not all plain sailing throughout the industry, however. Crest Nicholson, the Weybridge-based builder that was the subject of two failed unsolicited takeover approaches last year, is still trying to find its feet.
Martyn Clark, the industry veteran formerly with Bloor Homes and Persimmon, who was brought in as chief executive last summer, revealed in February preliminary results that he described as “disappointing and not where I want them to be in the future”. The context, he said was, “the challenging macro environment, the change in CEO and CFO, and more impactfully to press, having been in an offer period for some months over the summer”.
Crest’s preliminary results for fiscal 2024 revealed a 6% drop in revenue, from £657.5million to £618.2million, with pre-tax profits more than halving on an adjusted basic from £48million to £22.4million. On a statutory basis, including exceptional items of £166million, the firm moved from a £23.1million profit to a £143.7million loss. Fire safety remediation has been a big issue for the business. Home completions fell from 2,020 to 1,873. Completions on fiscal 2025 are set to be similar, within a 1,700 to 1,900 range.
Clark told analysts that, with the bidding war behind them, it was important to ensure that “we have the financial resources to meet our commitments” and that “everyone can start to now look forward”. There was, he conceded, “a lot more to do”, including trading through low-margin sites and replacing them with more profitable ones.
Crest’s share price, 154p at the time of writing, is down on the 181p it reached in January, and much lower than last summer’s peak of 266p, when the firm was the subject of bid interest. It now reflects what the firm knows is a tough road ahead.
This article was first featured in Show House Magazine. Read more like this and the latest industry insight here.
