On 8th July 2020, the government increased the stamp duty threshold to £500,000 for sales in England and Northern Ireland. Now, a mere month before the deadline of March 31st, Chancellor Rishi Sunak has rumoured further extension of the holiday.
Undoubtedly, this news has come as welcome relief to hundreds of thousands of buyers scrambling to meet the finish line, but the announcement of this policy has suffered an equal measure of political backlash too. Will the avoidance of a cliff-edge simply create another inevitable cliff-edge?
Tax Minister, Jesse Norman, argued that ‘it was the time-limited aspect of the measure that drove increased demand’ in response to the severe decline of transactions during April 2020.
Let’s take a look at what the stamp duty holiday achieved the first time round:
• The likelihood of sales falling out of bed due to buyers not being able to commit to the financial responsibility of the deposit has been reduced.
• Lessened the pressure off the conveyancing process.
• Enabled some last minutes sales to be agreed, creating a surge in the market once more - property prices have risen 4.3% in the last year making it the biggest annual jump since 2017, according to Zoopla.
• Whopping savings - if the extension goes ahead as planned the estimated figure of savings could exceed £984 million, according to the popular property portal.
It has also alleviated the pent-up demand of the property market and increased the interest of overseas buyers; some of the most commonly searched terms for financial advisors were found to be ‘Visas’ and ‘foreign income’.
It’s fair to say that not everyone is happy to hear of Sunak’s soon-to-be decision.
The true ramification may still be yet to come and has already created serious backlogs and delays, bearing in mind that the average timescale from point of offer to completion usually takes between 6 and 12 weeks. Buyers and sellers who are unlikely to meet the deadline, as well as those in the property industry themselves, have fought to move the date: headlines this week rumour the government will honour an extension until the end of June 2021.
This illusion of increased property value has caused house prices to catapult and has formed it’s own artificial economy with the clock ever ticking. First-time buyers now must elbow through the mainstream to gather larger deposits and barter with banks that grow more selective by the day to lend. Six months onwards from when the policy was introduced Halifax has recorded that the average property rose by a staggering £57,790.
A mammoth number of buyers could miss out on the relief of stamp duty through "no fault of their own" says Nick Leeming, chairman of Jackson Stops. He added: "That won’t just impact individuals, but buyers throughout chains, putting a significant number of transactions at risk. Removing support suddenly would also have a ripple effect beyond the property market, as retailers, moving companies, tradespeople and countless others suffer from a reduction in market activity."
Exactly how these changes will be implemented has not yet been laid out.
Various politicians have referred to the approach as ‘tapered’ to gradually phase the end of the policy by resetting the deadline and avoiding this much feared ‘cliff edge’ of March 31st.
Conservative MP, Elliot Colburn, added to the debate that this has created a "rare moment of unity among three political parties in highlighting problems with a tax. I suspect that we have very different ideas about how to reform stamp duty, but that was a rare moment of unity in which we seemed to agree that stamp duty land tax needs a longer-term look. However, as I said in my opening statement, I appreciate that this might not be the moment—in the middle of a pandemic—that the Treasury wants to do that assessment."
Given that 80% of current sales agreed in England will pay no tax, extending the deadline will enable the 628,000 sales still going through an opportunity to complete the conveyancing process in time and overcome the delays in a COVID safe manner.
Our advice: instruct trusted solicitors who have the resources and time to dedicate and act fast. Whilst the future may seem uncertain for the property industry, listen to the guidance of your agent and trust in the process.
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