Reeves's stamp duty raid kills the fixer-upper
The Chancellor neglected to extend a stamp duty discount introduced by Liz Truss during her premiership, adding thousands to the cost of moving home.
The added tax bill has also caused the proportion of homes bought and sold within a year to drop 1.3 percentage points to 2.3pc since 2024, the lowest it has been since 2013, according to analysis by Hamptons.
The estate agent said the cost of stamp duty now eats into 30pc of the profit from buying a home, renovating it and then selling it. Only two thirds of flipped homes sold today will turn a profit, the company added.
Stamp duty costs have risen drastically since the end of the pandemic. The Conservatives introduced a stamp duty holiday between July 2020 and June 2021 to stimulate the market during lockdown. During that time, no stamp duty was owed on the first £500,000 of a property's value.
As part of the now-infamous 2022 mini-Budget, former chancellor Kwasi Kwarteng raised the stamp duty exemption from £125,000 to £250,000. In April this year, that discount expired, and the thresholds for stamp duty land tax reverted to £125,000.
In her maiden Budget, Ms Reeves raised the stamp duty surcharge for second home purchases from 3pc to 5pc, in an attempt to discourage second home ownership and give first-time buyers the edge over landlords.
As a result, the number of homes bought, renovated and sold for a profit dropped to 7,301 in the three months to March. The figure was 27pc below the 10-year average for that period, according to Hamptons' analysis of Land Registry data.
Aneisha Beveridge, of the estate agent, said the added tax bill, coupled with rising material and labour costs, had 'multiplied the costs for those people who are refurbishing homes to a level that's increasingly unviable'.
In the past 10 years, the average stamp duty bill for a flipped property has more than tripled from £1,900 to £6,375, shaving off a fifth of the average profit.
Ms Beveridge said: 'Bigger stamp duty bills are wiping out a lot of profit from flipping. In some cases, these bills are now higher than the cost of renovating the property.
'This, together with rising material and labour costs and, in some places, falling house prices, makes flipping homes an increasingly tricky business.
'The second home stamp duty surcharge was introduced to tilt the market towards first-time buyers at the expense of landlords, something that it has successfully done.
'These are often empty homes which need a lot of love and are typically projects that most first-time buyers and movers have shied away from.'
Hamptons found the average profit earned on a flipped property in England and Wales was £22,000 in the first quarter of this year.
This is £6,000 more than profits earned on properties last year. However, slower house price growth and the shift towards flipping cheaper homes have meant that gross profits have almost halved since they last peaked at £38,000 in 2022, and remain lower than they were a decade ago.
Flipping properties increasingly only stacks up in the Midlands and North of England, where property prices and stamp duty costs are lower, Hamptons said.
In the three months to March, 61pc of flipped homes were in the Midlands, the North and Wales – up 50pc from a decade ago.
Ms Beveridge said: 'It's also where more house price growth has been concentrated over the past few years. While the returns aren't as high as with homes in the South in cash terms, higher yields and lower tax bills continue to make the North the homeland of flipping.'
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