Home sales down by 7% on a year ago, says HMRC

News at Howes Estates | 03/08/2015

Meanwhile, Nationwide this morning reported that house prices in July rose by 0.4% to stand at £195,621.

The HMRC transactions figure is 14% higher than in the first three months of this year, but 7% lower than the same quarter in 2014.

In addition to the transactions where Stamp Duty was payable, there were 73,400 transactions where purchasers were not liable for tax – generally, because the value was under £125,000.

Meanwhile, data and listings sharing firm LonRes has reported that transactions across prime London were down 22.7% in the second quarter of this year compared with the same period last year.

According to Nationwide, annual house prices in July were 3.5% higher than a year ago.

Robert Gardner, Nationwide’s economist, said: “After moderating over the past 12 months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%.

“This would bode well for a sustainable increase in housing market activity, though whether this will be maintained will depend on whether building activity can keep pace with increasing demand.

“The outlook on the demand side remains encouraging. Employment growth has remained relatively robust in recent quarters, and, after a prolonged period of subdued growth, wage growth is also edging up. With consumer confidence buoyant and mortgage rates still close to all-time lows, demand for housing is likely to firm up in the quarters ahead.

“It remains unclear whether activity on the supply side will catch up with demand. The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term.”

He also said that is evidence that Stamp Duty reforms have reduced “bunching” at key price points.

He said: “The slab structure used to result in significant distortions with a clustering of transactions at the tax thresholds. Under that system, paying £1 more would result in significant additional Stamp Duty being due (for example, paying £1 over the £250,000 or the £500,000 threshold used to trigger an additional £5,000).

“Even though the change to SDLT only came into effect six months ago, the impact on the pattern of transactions is already evident, with much less bunching of transactions around the £125,000, £500,000 and in particular the £250,000 price points.

“Moreover, based on the first six months of transactions data from the Land Registry, nearly 235,000 purchasers in England and Wales have paid less tax under the new regime, with an average benefit of  around £1,800.

“The benefits are greatest in the south of England where average house prices are higher. We estimate that around 85% of transactions in London, the south-west and south-east have benefited from the changes, compared with around 55% in the north, Yorkshire and Humberside, and the north-west of England.

“However, we estimate that around 5,000 (2%) of purchasers paid more (two thirds of whom were in London), with an average of £28,000 more tax being paid compared with the old system.

“On balance (considering the net effect of those paying more and those paying less), we estimate that the changes have resulted in around £275m less tax being paid than would have been the case under the old Stamp Duty regime.”

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