Jo Hodges, Sales and Marketing Director at Redbrick Solutions shared her thoughts with Today’s Conveyancer about the upcoming deadline for the stamp duty land tax (SDLT) holiday.
The temporary increase in the stamp duty threshold to £500,000 for property sales in England and Northern Ireland comes to an end in March. Anyone completing on a main residence costing up to £500,000 before then will not pay any stamp duty, saving as much as £15,000 on a transaction. The SDLT holiday was aimed at helping buyers who have suffered financially because of the coronavirus pandemic. It was also intended to boost a property market hit by lockdown, which, according to The Halifax, saw house prices fall for four months in a row. The average stamp duty bill will drop by £4,500 with nearly nine out of 10 people buying a main home this tax year paying no stamp duty at all.
The last stamp duty holiday was back in 2008, in an effort to lift the market following the financial crisis. The 2008 holiday cost approximately £600 million to the treasury by suspending stamp duty for a year on properties worth up to £175,000. It is an indication of the severity of the current crisis that the government is now removing SDLT up to a £500,000 threshold, at an estimated cost of £3.8 billion to the Treasury. The last stamp duty holiday did by some means produce the desired effect of getting first time buyers onto the property ladder but some may argue that this SDLT holiday has in-fact overstimulated the market.
Many who hope to benefit from the stamp duty holiday fear that it will not last long enough for them to complete. The conveyancing process takes time even under optimal conditions. In addition, the stamp duty holiday itself has caused a surge in demand, meaning that solicitors are overwhelmed with demand at a challenging time. One way to alleviate these pressures is to ensure that you have an expert case management system in place. Redbrick Solutions case management has the functionality expected from a first-rate case management solution and will enable you to progress your matters more efficiently so allowing more matters to be processed overall.
Fourteen trade bodies, including The Conveyancing Association and The Law Society, have called for a stamp duty holiday extension. The ‘cliff edge’ of 31 March is getting closer and so the pressure to complete on time is increasing. Depending on the prices that have been negotiated, this cliff edge could make some purchases unaffordable for the buyers, therefore causing entire property chains to collapse. This would be a blow for the housing market, and something that the government should want to avoid.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said:
“The stamp duty holiday has turbocharged the housing market, sending house purchase mortgage approvals in October to their highest level since September 2007. They likely will remain at a very high level during the winter, given that Google Trends data show that visits to the three main property websites were up 30 per cent year-over-year in the week ending November 22, unchanged from recent months.’ Andrew Montlake, of mortgage broker Coreco, commenting on the number of approvals in October said that it ‘reflects the mad stampede to buy before the stamp duty holiday ends. This data is bittersweet as we all know that 2021 could see the real economic impact of the pandemic start to bite.’
“It is not only industry bodies who are calling for an extension but also the public are asking for a resolution to the problem. A petition has been set up on the official parliament portal by an individual who is looking to move into a new build scheduled to complete at the start of March 2021. The petition states: “Extending the stamp duty holiday for an additional six-months will assist many buyers who are looking to move to a property that they will not be able to afford otherwise. This will help to stabilise the housing market.”
So far there are no plans to extend the stamp duty holiday to avoid this cliff edge. However, it has been suggested that a phased or tapered approach might provide more security to homebuyers – for example, by allowing buyers to benefit from the stamp duty cut if they have exchanged contracts but not yet completed by the deadline. Extending the deadline by six-months will simply move the cliff edge further away and so a phased or tapered approach appears to be a more sensible way forward and would be welcomed by the industry and public alike.