While the country pores over a roadmap out of lockdown, the property market has already had a jumpstart. Everyone agrees that extending the Stamp Duty Holiday has immunised the property industry against serious harm during lockdown. Hence, many experts have celebrated its extension. However, another school thought says that you can have too much of a good thing.
“The stamp duty holiday has provided a fantastic boost to the housing market by driving demand for properties after the first national lockdown”, Simon Nosworthy from Osbornes Law said. “With that in mind it would make total sense for Chancellor Rishi Sunak to give in to the clamour and extend the scheme which has seen hundreds of thousands of house buyers save up to £15,000, right? Not quite, as there are many valid reasons for why letting the stamp duty holiday come to a natural end on March 31 would not be a bad thing.
“Conveyancers like me and estate agents have probably never been busier thanks to the holiday. There have been lawyers having to turn away business while some local authorities have struggled to keep pace with the number of searches requested. While this has undoubted boosted business and the economy generally, unless the Chancellor decides to abolish stamp duty forever – around as likely as the abolishment of income tax – then the holiday can’t go on indefinitely.”
He added: “The latest estimates are that 70-100,000 home buyers will miss the March 31 deadline and have to be paying stamp duty that they may not have accounted for. This is obviously terrible news for those affected, but extending the holiday would simply mean delaying the pain to a different set of house movers in the future. Yes, a delay now would save all of those would-be house movers the stamp duty fee, but all that does is store up the problem for other people down the line.
“One major problem with the stamp duty holiday is that it has created an artificial bubble that has seen house prices rise by 8.5%. This means that first time buyers have had to save more to come up with a deposit, when things were already difficult enough to get on the property ladder.
“In addition, there is a real risk that prices, having been artificially inflated, may well go down when the holiday ends. Those who bought during this period may find they have overpaid, potentially negating any saving they made from not paying stamp duty.
“The holiday has reportedly saved house buyers £5 billion, which is unsustainable for the exchequer. While the holiday has fuelled house moves, the property market had already roared back into life after the first lockdown. It is therefore reasonable to believe that the market would still be in decent shape when the holiday ends.”
Others argue that pushing the deadline back to June is simply kicking the can down the road. Nick Sanderson, CEO, Audley Group, said, “Whether the stamp duty holiday ends in March or June, the housing market won’t easily withstand the shock of an immediate cancellation. Buyers and sellers will still be left in limbo, just twelve weeks later. The policy was implemented to get the market moving and if the Chancellor wants this to continue, it needs to be phased out gradually rather than a hard stop.
“The stamp duty holiday has succeeded in some parts of the housing market but not all of it. The Chancellor must use the Budget to also acknowledge the need for more targeted measures. Specific support for those downsizing or moving into housing with care is one area that could have a significant impact on the whole housing market, but has been largely neglected. Now must be the time that changes.”
Others believe that a Stamp Duty Holiday should never have been sanctioned in the first place. Matthew Cooper, Founder & Managing Director of Yes Homebuyers, said: “You have to question the sanity of a government that deliberately chooses to intensify an already serious issue by repeating the exact cause of the issue in the first place.
“Those looking to purchase the most expensive asset in their life are arguably some of the least in need of financial support in the current climate. When you couple this with the angst felt by many current homebuyers due to the huge market delays already caused by the stamp duty holiday, it seems fairly irresponsible to add further fuel to the flames with a deadline extension.
We know that a large proportion of transactions are in danger of falling through, bringing property values down with them. So reading between the lines, it certainly looks as though the government are taking a head in the sand approach to prolong the inevitable rather than extending a genuine helping hand to homebuyers.”
Perhaps a more sensible option would be to allow a window for those who have already started the process of buying a new home. Rob Houghton, CEO of reallymoving said: “This policy has been critical in keeping the housing market moving through the pandemic but I would urge the Government to restrict this extension to buyers already in the conveyancing process – so those who have had their offer accepted and appointed a solicitor to undertake the conveyancing work. This gives buyers who began their homebuying journey in good time but have been subject to delays, a new window to complete.
“While the holiday has been helpful for second steppers and those higher up the ladder, it has also caused prices to rise dramatically over the last year at the expense of First Time Buyers. They have faced greater competition for homes, price increases and a restricted mortgage market – which led to a 12% fall in the proportion of First Time Buyers in the market in the second half of 2020.
“Encouraging a new rush of buyers into the market could once again have a detrimental effect on First Time Buyer share which has recovered strongly since the start of the year, back up to 58% of transactions from a low of 46% last September.”
Other have argued that the market has natural immunity, and doesn’t need to by stopgap policies. John Phillips, national operations director, Just Mortgages and Spicerhaart said: “The market has been predominantly driven by changing requirements. With millions now working from home, space for a desk, in some cases two, has moved up the priority list.
“People have also been looking for outside space as a result of the lockdowns. The lockdowns have also helped some to save a larger deposit. Also, by removing the need for a commute, people have looked to move out of the city.
“This latest announcement along with the confidence brought by the vaccine should help keep the momentum the market has built going for another few months. The end to the holiday, whenever it falls, will be a speed bump in the road. The market will slow down as we approach it, but will speed up again when we are past it.”
