Around 325,000 homebuyers who agree to purchase a property before the end of the year are expected to miss out on the stamp duty holiday
David Hannah, Founder and Principal Consultant of Cornerstone Tax, discusses why the holiday needs to be phased out in light of the second lockdown, as opposed to ‘cliff-edged’
Even before Boris Johnson’s press conference to the nation on Saturday evening, where he announced tougher coronavirus restrictions across England, many were already calling on the government to extend the stamp duty holiday.
Now, with a second national lockdown imminent, extending the holiday will be even more crucial to avoid roughly 325,000 homebuyers missing out.
So far, the stamp duty holiday which is set to end next March, has led to record highs in the UK’s property market, with the number of sales surpassing pre-pandemic levels. The measures save buyers an average of £4,400, with savings of up to £15,000 for properties valued at £500,000 or more.
However, the boom in house sales since the introduction of the temporary cut in stamp duty during lockdown, have led to conveyancing, surveying, mortgage and search services being overwhelmed. A second national lockdown is only set to exacerbate this problem, and lead to further delays in the supply chain system.
According to the property market analysts Twentyci, the average time it is taking from agreeing a sale to completion is five months, meaning that sales agreed now may not go through before the tax break comes to an end on March 31st. This means that roughly 325,000 homebuyers who agree to purchase a property before the end of the year are expected to miss out on the stamp duty holiday.
Twentyci also calculated that if one in five buyers decides to pull out of their purchase because they will not complete before the deadline, the percentage of sales falling apart will rise from 23% – 53% by March, when taking into account the subsequent impact on purchase chains. The loss of 325,000 sales would cost the economy £4 billion.
David Hannah, Founder and Principal Consultant of Cornerstone Tax, discusses why the government needs to review this stamp duty holiday in light of the second lockdown, to prevent the cliff edge of 325,000 people who believe they will still benefit missing out:
“With the second national lockdown beginning on Thursday, it is critical that the government reviews this stamp duty holiday, to allow the conveyancing, surveying, mortgage and search services who are already overwhelmed, to continue supporting homebuyers despite further delays that are likely to be fuelled by a second lockdown.
The government either needs to announce an extension or amend the tax payment date so that homebuyers can still take advantage of the holiday even if they cannot complete by 31st March next year. The most preferable option would be a phasing out of the holiday, to avoid those who are currently in the process of purchasing their properties, essentially being thrown off a cliff-edge.
The government needs to do more to help get people get on the property ladder – government-backed purchase mortgage guarantees for borrowers would be a great way to reinstall confidence in the lending market. If the term of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security again, help buyers, and get the market moving again.”
