The move has also warded off a collapse of the UK housebuilding sector, with more new builds completed in the third quarter of 2020 than in the same period a year earlier.
Experts have warned that if the stamp duty holiday ends in March as planned, there is likely to be a slump in the housing market and housebuilding sector, jeopardising the economic recovery from the pandemic.
A new report by the Centre for Policy Studies has found that after an initial sharp decline in sales between April and June 2020, the number of housing transactions increased from 132,090 in the second quarter to 225,870 in Q3 and 316,300 by the end of Q4 – the highest level since before the global financial crisis in 2007/8.
The think tank’s research shows that stamp duty revenues actually rose by 27 per cent in Q3 compared to Q2, from £1.1 billion to £1.35bn.
Changes to the Land & Buildings Transaction Tax (LBTT) rules in Scotland have benefited first-time buyers north of the Border.
Report author and CPS data analyst, Jethro Elsden, said: “Stamp duty may well be the worst tax on the UK’s statute books. It places a significant burden onto prospective buyers and creates huge distortions in the UK housing market. It damages the economy, and leaves people stuck in the wrong homes and reduces the number of new builds brought to market each year, which makes the housing crisis harder to solve.
“The introduction of the stamp duty holiday last July did not just rescue the housing market and construction sector, but proved conclusively that high stamp duty rates have become a damaging drag on the economy, the housing market and people’s aspirations.
“With the holiday due to finish at the end of March, we urge the UK government to either make the £500,000 threshold permanent for primary residences, or better yet, abolish it entirely. At the very least the Chancellor must look to extend the current stamp duty holiday, or he risks delivering a sledgehammer blow to the housing market, and the wider economy.”