The role of the stamp duty holiday in the rise in UK house prices across the last year has been “overstated”, according to research published by Resolution Foundation.

The think tank suggested that other factors have played an equal and “if not more important” role in the recent house price boom.

A new report from the Foundation showed that the average value of a UK home increased by 13.2% between June 2020 and June 2021 – with the think tank highlighting the common assertion that it was principally caused by the transaction tax holidays introduced across all UK nations in summer 2020. These included the ongoing stamp duty holiday in England and Northern Ireland, which is due to be phased out at the end of September, and the already-ended transaction tax holidays in Scotland and Wales.

However, the research suggested that higher savings, changes in housing preferences, and falls in mortgage rates would have likely led to significant price rises in the absence of a stamp duty holiday. The think tank’s report stated that if cuts to transaction taxes were driving the house price trends of the last 12 months, higher growth would have been expected in areas where the savings from the policy change were most significant.

In England, homes priced around £500,000 have seen the biggest transaction tax savings relative to price, while in Scotland and Wales those worth £250,000 were most affected – and this is where the sharpest stimulus was expected. In the last year, however, prices grew 13% in the fifth of local authorities where savings as a result of a transaction tax holiday were negligible or non-existent, compared to 7% in the fifth of local authorities where the highest savings were achieved.

Furthermore, Resolution Foundation also found that areas where the savings from the transaction tax holidays have been most significant have been no more likely to see an increase in transactions than those where the gains have been small – except immediately around deadlines for tax breaks to end.

Resolution Foundation researcher, Krishan Shah, commented: “UK house prices have boomed over the past year, and many have pointed the finger at the stamp duty holiday as the main cause. But the evidence doesn’t support this popular claim. It now seems that other factors, such as higher savings and changing housing preferences, may have been more or equally important.

“The problem with the stamp duty holiday isn’t that it caused a house price rise, but that a boom in transactions and prices would almost certainly have taken place without it. That begs big questions about value for money, especially when we consider that the policy in England and Northern Ireland alone looks set to cost an estimated £4.7bn in forgone tax revenues.

“We must also remember that, regardless of its drivers, the house price surge of the last year has increased wealth gaps in our country and left many aspirant first-time buyers even further away from realising their ambitions of owning a home.”

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