Transaction Tax Variation and House Price Change- a study of the UK Housing Market

During the pandemic time, the UK government introduced Stamp Duty Land Tax (SDLT) rate reduction to stimulate the housing market. Reduced Stamp Duty Land Tax (SDLT) rates would apply for residential properties purchased from 8 July 2020 to 30 September 2021 inclusive. According to the policy, the temporary nil rate band of £500,000 would be in place until 30 June 2021, then extended to 30 September 2021. Thereafter, the nil rate band would return to the standard amount of £125,000 on 1 October 2021. The purpose of SDLT reduction was to support the housing market and the jobs and businesses which relied on it. At the same time, it would lower the transaction costs of moving home to maintain the liquidity of the housing market. Evidence suggests the stamp duty holiday made a positive impact on the property market. In this research, we investigate how the tax temporary reduction affects housing prices in the UK, using all housing transactions in the UK from March 2020 to December 2021inclusive, three months pre and post-SDLT cut with quasi-experimental variation from reduction. We also examine whether the effect was consistent across all price bands.