BLB property expert, Caroline Entwistle, reacts to speculation that the Chancellor is about to extend his Stamp Duty holiday. To discuss your residential property requirements, including requesting a conveyancing quote, please contact our Property Team by email, or call them on 01225 462871. You can also request a conveyancing quote online.
After considerable speculation to the contrary, is the Chancellor about to extend his Stamp Duty holiday after all? Overnight, press reports cite “sources” saying he will use next week’s Budget to announce a three month extension of the tax break until the end of June.
In January, we advised that, realistically, time had run out already for new entrants to the market hoping to complete before the end of March. Indeed, the belief that saving Stamp Duty remains a major incentive for many buyers seems borne out by reports that in January, 7% more transactions fell through than in the same month last year. New buyers have faced challenges, including a huge backlog nationally of Local Authority searches.
There has been concern in many quarters at what has been described as an approaching “cliff edge”, particularly in a sector of the economy so important to the government. Last week, Rightmove estimated that an extension of just 6 weeks would see between 120,000 and 160,000 additional property transactions getting “over the line”.
Market at most buoyant since 2007
A recent report by the Centre for Policy Studies said the Stamp Duty holiday had resulted in house sales reaching levels not seen since before the 2007 financial crisis. Following a slump in the first three months of lockdown, the number of transactions increased from 132,090 in the second quarter of 2020 to 225,870 in the third quarter, and to 316,300 by the end of quarter four.
Interestingly, Stamp Duty revenue actually rose by 27% per cent in the third quarter compared to the second, from £1.1 billion to £1.35 billion. And there is every expectation that revenue will have risen further in the final quarter. This is explained by the overall buoyancy of the market, with many transactions involving properties over £500,000, which do not benefit from the tax saving.
Last week we reported that while levels of demand in the housing market remain healthy, supply has become a problem. Last month, 21% fewer properties came to market than in January 2020. It remains to be seen whether an extension to the Stamp Duty holiday will encourage more people to market their property. But with the vaccination rollout continuing apace, plans for lockdown easing and, dare we say, spring around the corner, who knows?
Arguably though, extending the deadline by just a few weeks or months is simply delaying what the Centre for Policy Studies describes as a “sledgehammer blow to the housing market.” They are calling on the government to either increase the threshold permanently on primary residences up to £500,000 or abolish it altogether. The problem for the Chancellor is that such a move would deprive him of revenue exceeding £3 billion a year.