4% Demand, 2% Supply
Stamp Duty Holiday Volatility
Buyer demand has recovered from the end of the stamp duty holiday thanks in part to the availability of mortgages around 4%. Meanwhile, stock available to buy is rising but many sellers’ price expectations are still rooted in the previous sub 2% rate housing market. The end of the holiday has also affected the ONS price index.
4% Demand, 2% Supply
Early signs suggest buyer demand is recovering from the post-stamp duty lull, partly helped by mortgage rates available around 4%. Last month Rightmove(PDF) reported that, although new buyer demand fell in April, there were signs of a “bounce-back” in May. The Zoopla(PDF) index, published later in the month, reported a “Rebound in sales agreed after Easter lull – up 6% on last year” and the number of sales agreed per estate agent is “running at the fastest rate for 4 years”. However, the number of mortgage approvals for house purchase continued its decline in April and is now down nearly 12% over the last six months. Interest rates have also risen since the beginning of May so some of the cheapest rate deals might disappear, limiting buyer demand in coming months.
While demand has recovered, the volume of stock available for sale on listing websites is also increasing. But many sellers are still basing their price expectations from when the market was priced at 2% mortgage rates. This has been an ongoing situation since rates started rising and, so far, there’s been no reason for large numbers of forced sales. That’s unlikely to change for the time being but there is clear regional variation in the availability of homes to buy. Zoopla reports stock on the market has risen faster in the south of England (up 21% from last year in the South West) and less so across the rest of the country (just up 3% in the North West). This is unsurprising given the regional impact of higher rates but does point towards continued stagnation in the south.
Stamp Duty Holiday Volatility
The stamp duty holiday has ended but we’re still seeing its effects in the data. For example, the latest HMRC transaction data shows an inevitable 64% monthly fall in transactions in April following the March spike as buyers rushed to complete ahead of the deadline. While there were around 77,000 more transactions in March than normal, the net effect including the April data and when compared to normal pre-pandemic levels, is around 42,000 – and this net figure will probably fall further when May’s transaction data is released.
It’s not just transaction data that’s showing stamp duty related volatility but also the ONS / HM Land Registry house price index. For example, the latest release reported a 14.3% annual rise in North East house prices in March. A closer look shows the annual growth is partly the result of a spike in March, as the stamp duty holiday ended (Fig 2). This is surprising given the index is mix-adjusted and we don’t see any SDLT effect in other price indices. The index has been subject to larger revisions recently due to low turnover, but this isn’t the first time a stamp duty holiday has affected it. Back in 2021 we also saw spikes in average prices as the pandemic era stamp duty holidays ended. This suggests there’s something not quite right with the mix-adjusted ONS index.
Market A Glance
Economy – UK
The ONS estimated monthly GDP increased 1.1% in the year to March 2025. Monthly GDP was 4.1% above the pre-pandemic peak recorded in January 2020. However, this monthly data will continue to be revised in the future.
House Prices - UK
Rightmove reported a 1.2% annual rise in asking house prices in May 2025 while Nationwide reported a 3.5% annual rise in their mortgage approval-based index over the same period. Meanwhile, the ONS reported a 6.4% annual rise in its sales agreed index for the year to March 2025.
Transactions – UK
HMRC provisionally reported 64,680 residential transactions in April. This was 35% below the pre-pandemic (2013-2019) average. Meanwhile, the Bank of England reported mortgage approvals for house purchase in March 2025 were 8% lower than the pre-pandemic average.