Covid stamp duty holiday cost £6.4bn and helped rich house buyers in south, analysts say

Rishi Sunak has been warned that he punished first-time buyers by sending soaring prices even further out of reach

The stamp duty holiday introduced because of Covid cost the Treasury £6.4bn and mainly helped rich house buyers in the south of England, analysts say.

Rishi Sunak’s policy also punished first-time buyers by increasing competition and by sending property prices soaring even further out of their reach.

The analyses comes after the end of the 15-month holiday – introduced in July 2020 when the chancellor feared the pandemic would hit the housing market – and is based on official data.

The property agent Savills put the bill at £6.4bn – almost twice the predicted £3.8bn when the tax break was announced – and said roughly half the benefits went to buyers of homes worth more than £500,000.

MoveStreets, a property search app, highlighted a stark north-south divide – which meant London and the south east gained four times as much as the three northern regions.

It said the biggest winners were homebuyers in the south east (£1.2bn) followed by London (£1bn), putting them streets ahead of the north west (£300m), Yorkshire (£218m) and the north east (£66m).

Furthermore, with the stamp duty holiday the prime reason for a boom in house prices since the summer of 2020, homebuyers were warned they are now effectively tens of thousands out of pocket.

The comparison site GetAgent.co.uk said the average price rise was £37,156 or 14.8 per cent – and even higher in the north west (20.7 per cent) and north east (17.8 per cent).

Colby Short, its chief executive, warned: “Many will be wondering whether it was really worth it?

“To rub salt in the wound, those now entering the market are facing a considerably tougher task as a result of the astronomic levels of house price growth seen since summer of last year.”

The Treasury staunchly defended the holiday, saying: “Our temporary stamp duty cut helped to protect hundreds of thousands of jobs which rely on the property market by stimulating economic activity.”

But George Dibb, head of the IPPR think tank’s Centre for Economic Justice, said: “Even before the pandemic, house prices in the UK were too high for most people – yet the stamp duty holiday further boosted prices.

“Getting on the housing ladder is now harder than ever, and those struggling to save for a deposit will be rightly angry that government policies have made this even more difficult.”

Lucian Cook, Savills’ head of residential research, suggested the Treasury would “look back on it and realise it’s been quite a generous tax break at a time when the market is quite strong”.

In March this year, Mr Sunak extended the stamp duty holiday until the end of June for purchases up to £500,000 and until the end of September for those up to £250,000.

The Treasury said the property market was worried about the 160,000 or so home sales that are stuck in limbo and at risk of falling through if the stamp duty holiday ended immediately.