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“Will house prices drop in 2022 after stamp duty holiday ends this year?”

… asks The Sun.

Figures released by Nationwide yesterday show the relief is partly to blame for a surge in house prices at the fastest pace since 2004. Annual house price growth jumped to 13.4% [£29,000] in June – the strongest growth since November 2004.

Tax on the first £500,000 of a home purchase has temporarily been scrapped until the end of today (June 30). The relief means Brits could save up to £15,000 if they complete their transaction before the deadline.

They seem to accept that SDLT is borne by the vendor and cannot be ‘passed on’ to the purchaser. If only it were as widely acknoweldged that Land Value Tax can’t be ‘passed on’ to tenants, which is a traditional Killer Argument Against LVT! The equal and opposite argument is the rhetorical question, “If it can’t be passed on, then it will be borne by landlords. Why do you hate private landlords?”. Which we don’t, we just see them as largely superfluous, like men walking in front of cars waving a red flag in the early days of motoring (which might or might not be a myth).

But I digress. I doubt whether the stamp duty cut really had anything to do with anything – anecdotal evidence from estate agents is that people were bored and stuck at home during lock down, had nothing else to spend their money on and wanted a bit more space.

And if you look at the 18-year house price cycles (data from Nationwide, file “UK House Prices Adjusted for Inflation”) you’ll see that this bubble has a long way to go before the next peak and subsequent crash, financial crisis etc. It’s interesting to note that the peaks of the 1973 and 1993 cycles were exactly 18 years apart; the three troughs were 18 years apart plus/minus six months.

So a fair guess would be that house prices peak at over £300,000 (plus inflation) in 2025 and then fall back to their current level (plus inflation). The 1993 – 2019 cycle was unusual because it coincided with falling interest rates, the end of rent controls and the emergence of buy-to-let, so something that extreme is unlikely to happen again: