Residential stamp duty land tax receipts lead the way

According to the latest statistics released by HMRC, total stamp duty land tax (SDLT) receipts rose by 9% in the 2022/23 financial year compared to 2021/22. Residential SDLT receipts increased by 15% from £10.17bn to £11.72bn and non-residential SDLT receipts decreased by 7% from £3.93bn to £3.64bn.

The rise in residential SDLT receipts could be attributed to the increase in demand for larger homes with more outdoor space, as people continued to work from home. Additionally, the government’s decision to extend the SDLT nil-rate threshold for residential properties to £250,000 in September 2022 could have helped boost the number of transactions. However, the decrease in non-residential SDLT receipts could be attributed to the uncertainty surrounding the new work from home culture in the UK as businesses adapt to a more flexible way of working and therefore, the demand for office space may have reduced.

The rise in transactions benefiting from first time buyers’ relief (FTBR) in 2022/23 is a positive sign for the UK housing market. The FTBR scheme was introduced in 2017 to help first-time buyers get on the property ladder by reducing or eliminating the amount of SDLT they have to pay. The increase in relieved transactions from 151,900 in 2021/22 to 203,300 in 2022/23, along with the increase in the amount relieved from £372m to £708m, indicates that more first-time buyers are getting on the housing ladder and taking advantage of the scheme.

The UK housing market has witnessed a remarkable divergence between the residential and non-residential sectors in the 2022/23 financial year, with the former seeing a surge in demand and the latter facing a decline. It is likely that the pandemic has reshaped the preferences and behaviours of homebuyers and businesses, leading to a shift in the dynamics of the property market. 

Looking ahead, the outlook for the UK housing market is uncertain, as it depends on various factors such as the economic recovery, the base rate, the supply and demand balance, and the political environment with a potential change in government in the not-so-distant future. Some experts predict that house prices will fall by approximately 2-3% in 2024, due to the uncertainty in mortgage rates. However, the number of transactions is expected to pick up from 2025, with incomes predicted to grow and the hope that mortgage rates fall.