Stamp duty is simply tax that people pay when buying a property in the UK which varies depending on where you’re buying and how much the property is bought for.
In July 2020, Rishi Sunak announced that there would be a stamp duty ‘holiday’ until 3 March 2021. In practice, this meant that the threshold for paying stamp duty was increased to £500,000, meaning that no payments were needed on properties up to that amount, and only needed to be paid on the value of the amount exceeding £500,000. Buyers could save up to £15,000 when purchasing property.
The holiday was aimed to encourage buyers in a market and economy impacted by Covid-19 and the realities of lockdown. As the property market had fallen every month for the four months prior to the implementation of the holiday, it was a much needed incentive for people to start buying again.
The impact is there for all to see, the housing market immediately began to grow again and 2020 culminated with one of the healthiest housing markets for years. HMRC found that December 2020 saw a 31.5% rise in residential transactions compared to December 2019 and were even up 13.1% from the month before.
UK average house prices increased 7.6% in the year to November, the highest rate since June 2016, to a national average of £250,000 and £500,000 in London.
While these figures make for pleasant reading for those in the property sector, and do show a positive economic impact of the stamp duty holiday, it did raise some issues. Because of the rush to purchase property and with the knowledge that people would be paying no to less stamp duty, the dramatic rise in house prices has priced out several people from purchasing property, notably first time buyers.
With the stamp duty holiday still set to end on 3 March 2021, there are some concerns moving forward. There have been multiple calls within the property market to extend the holiday to avoid ‘falling off a cliff’ come March. Many agents and property professionals have warned that ending the holiday as planned would risk the collapse of thousands of deals that haven’t been completed, while extending it would see wider economic benefits.
Some developers have even offered their own extension of the holiday, offering to cover the costs of stamp duty themselves for buyers up until October.
Many see the fact that the holiday ending coincides with the end of the furlough scheme as another reason to be wary. The removal of financial support schemes as well as the incentive to purchase property could see the market slow down with prices falling as quickly as they rose.
As experts in conveyancing, we’ve been keeping a keen eye on the housing market over the last year and are best placed to help you in the property market. Whether you’re a first time buyer looking to get on the property ladder while the stamp duty holiday is in place, looking to sell your home while prices are still high, or simply have any questions about your best course of action, our team are here to listen and to help.