How will the stamp duty cut impact new-build stock levels?

The latest research by Alliance Fund shows that the government’s decision to cut stamp duty could boost new housing delivery by 16%.

The changes to the tax mean that the SDLT will only be payable on property purchases above £250,000, while first-time buyers will only pay the tax on purchases above £425,000. This will save the average homebuyer up to £2,500 and the average first-time buyer up to £8,750.

The research by Alliance Fund concludes that the cut will also increase the level of new homes reaching the property market. 

By analysing the level of new-build completions seen following the original stamp duty holiday and comparing the level of housing delivery, Alliance Fund was able to determine these results.

New-build completions following the original stamp duty holiday

Alliance Fund's analysis shows that between Q3 2020 and Q3 2021, after the government’s SDLT holiday was introduced, 220,530 new homes were completed in England. 

The capital experienced a 23% boost in new-build completions. This is equivalent to 5,560 new homes compared to the previous five quarters.  

High levels of new-build stock were also seen across the East with a 20% rise, the North West and North East (+18%). 

Chief executive officer of Alliance Fund, Iain Crawford, commented: “A stamp duty cut is great news for homebuyers but while it’s sure to help cultivate demand for housing, there’s a good chance we may also see a boost to the number of new homes reaching the market."

"Of course, the saving itself doesn’t apply to housebuilders, although some do stomach the cost of stamp duty on behalf of their buyers and so there is a marginal benefit to their profit margins in this respect."

"However, the far more influential factor is the boost that a stamp duty cut will bring to overall market sentiment and this is very much a wave worth riding for those delivering new-build stock to the market."

"We’ve already seen how the stamp duty holiday helped the market bounce back during the pandemic, thanks to a heightened level of buyer numbers with budgets buoyed by a tax saving."

"This also spurred an uplift in the number of new-build completions by developers keen to capitalise on such positive market conditions and so we can expect the latest cuts to have a similar influence for both homebuyers and housebuilders alike."