"This is an incredible increase, and one that shows clearly the beneficial impact of having lower transaction taxes."
This is the highest number of February residential transactions in 14 years.
On a non-seasonally adjusted basis, transactions totalled 122,840, 48.3% higher than February 2020 and 26.4% higher than January 2021.
Dave Harris, CEO at more2life, commented: “February’s busy housing market will have been driven by the Chancellor’s Stamp Duty holiday. Many buyers will have hoped to capitalise on the tax cut before the original March deadline, while lenders and conveyancers worked hard to help as many borrowers as possible get over the line.
“While much has been made of the benefit of the tax cut for first time buyers and ‘second steppers’, it’s likely that transactions in February will have also been fuelled by ‘last time buyers’ looking to make the most of the stamp duty break, including those using equity release to fund a house purchase. At more2life, the number of equity release cases linked to house purchase has spiked in recent months as a direct result of the Stamp Duty holiday. For example, we would expect to see 5% of cases linked to house purchases in ‘normal’ market conditions, however this figure has now reached 15%.
“With a tapered extension to the Stamp Duty holiday now in place, it is likely that significant buyer demand will continue over the coming months – including in the lifetime mortgage market. Advisers will be at the forefront of serving this demand and will need to work closely with later life lenders to manage client expectations with confidence in the months to come as more ‘last time buyers’ look to use equity release to purchase a home.”
Anna Clare Harper, chief executive of asset manager SPI Capital, added: "HMRC's transactions data are important because these are key to prices and values in the housing market - affecting homeowners and investors of all scales. They give meaning to the more widely quoted house-price data since, for example, wild price rises based on a few local transactions should be interpreted differently to price rises based on a large number of transactions.
"Residential transactions in February were 48.5% higher than February 2020 and 23.0% higher than January 2021. This is an incredible increase, and one that shows clearly the beneficial impact of having lower transaction taxes.
"The bigger picture is not entirely about stamp duty though. There have been four major drivers of transactions since the strictest lockdown conditions were removed in 2020: the temporary stamp duty reduction and cheap debt as a result of very low interest rates, which give buyers a pricing ‘discount’; the release of pent-up supply and demand and desire to improve surroundings among existing homeowners, which is a behavioural change; and the ‘flight to safety’, since in times of uncertainty, people want to put their money in an asset that feels safe and stable, with low volatility.
"At the same time, appetite from international buyers, an important source of demand, was restricted over the last year. Overseas investment was held back by travel restrictions and nerves around Brexit and Covid-19. The good news is we are now seeing the return of international buyer confidence, and this is reflected in the data. Many international buyers are looking to ‘lock in’ the current exchange rate, and their confidence in the UK is improving, which tis is anticipated to further boost transactions in key cities.
"The temporary stamp duty reduction has had a more than proportionate impact on transactions, shown in the February data, because buyers who use mortgages can take debt out on the property price, but they cannot use finance to fund transaction costs. It’s extension, and the smoother transition anticipated from ‘tapering down’ of this relief, are great news for buyers and sellers in the UK housing market as not having this transaction tax removes friction, encouraging transactions.
"Looking to the future, we expect continued growth in transactions over the coming months, boosted by the extension of the stamp duty reduction as well as growth in appetite from UK-based and international investors - from individuals through to institutional investors."
