Calls to extend the stamp duty holiday in England and Northern Ireland are mounting after the whole of the UK was plunged back into a third lockdown earlier this week.
The prime minister and leaders from all corners of the UK announced national and regional lockdowns with immediate effect on Monday (4 January) after it was revealed that one in 50 people in the UK is infected with the killer Covid-19 virus.
These shocking statistics and the current rising infection and death rates (over 1000 deaths per day) are the result of an extremely virulent version of the Covid-19 virus sweeping across the nation. This rapidly changing situation has meant the government felt there was no choice but to implement a nationwide lockdown to keep the nation’s vulnerable inhabitants safe until they have all received at least one dose of the vaccine.
The stamp duty holiday, introduced in July 2020 by the Chancellor of the Exchequer Rishi Sunak, was designed to reignite the flagging property market following years of uncertainty over Brexit. This eight month discount period allows homebuyers across England and Northern Ireland to benefit from a stamp duty (SDLT) exemption when purchasing homes up to a value of £500,000 (previously this tax threshold was £125,000), with a reduced rate for more expensive homes. For example, someone buying a £700,000 property will save £5,000 in SDLT while another buying an £800,000 property will save £15,000.
However, this short-term stamp duty discount period is set to end on 31 March and property professionals are calling for this period to be extended.
The latest calls for a stamp duty extension follow reports that there is a huge backlog of property sales that are becoming more and more unlikely to complete before the 31 March 2021 when the current stamp duty holiday is due to end.
In its 2021 forecast, property portal Rightmove reported that there were 650,000 sales agreed in the pipeline, many of which the buyers were aiming to complete before the stamp duty holiday deadline to secure the significant savings available. However, some completions are already projected to be delayed until April Rightmove reports.
The property transaction system is ‘overwhelmed and understaffed’ mainly due to Covid-19 leading to delays in local searches and mortgage offers meaning people affected by these delays may not be able to complete in time and will lose out on the stamp duty holiday discount.
The concern is that many of the stamp duty discount savings are so great that people will not be able to afford to buy their property if the rates return to their pre-SDLT holiday levels.
Backing this fear up, research by the Guild of Property Professionals has revealed that around a third of home movers say they will pull out of the purchase if it becomes clear they are going to miss out on the stamp duty discount and this could effectively stall the property market altogether, which has only just started to recover after four years of Brexit uncertainty. The Guild is calling for an extension or a phased extension for those with deals already agreed at the very least.
Iain McKenzie, CEO of The Guild of Property Professionals, said: “If the deadline remains as it is, only a quarter of the sales agreed in January will complete in time. With 140,000 more people waiting to complete sales than this time last year, there will be a significant number of buyers who will have to find additional money for stamp duty if they have not budgeted for it. Our hope, and the hope of 71% of the public, was that the Government was going to extend the stamp duty holiday, or at the very least, introduce a phasing out period that will ease the pressure on all parties involved, and will prevent a cliff edge.”
David Hannah, Founder of Cornerstone Tax, has also voiced his concern that the 31 March cliff edge will knock the wind out of the sails of the long-suffering property market’s recovery, potentially leading to a housing market collapse. He said:
“It is critical that the government reviews this stamp duty holiday, and either announces an extension or amends the tax payment date so that homebuyers can still take advantage of the holiday even if they cannot complete by 31st March. 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.
More must be done to give the market some security in what will be a very turbulent few months,” Hannah continued.
There is even an online petition calling for a SDLT discount extension from a new homebuyer whose purchase has been hit by delays that has secured 39,000 signatures; this petition will be debated in parliament if 100,000 signatures are raised. At the moment, the government line is that it is not going to extend the tax break. The HM Treasury commented on the petition: “The SDLT holiday was designed to be a temporary relief to stimulate market activity and support jobs that rely on the property market. The Government does not plan to extend this temporary relief.”
Adding to the impending sense of doom, forecasters have predicted unemployment will rise when the furlough scheme ends in April putting further pressure on homebuyers trying to secure a mortgage. Furthermore, in a shock announcement last month, Wales increased its rate of property tax on second homes by 1 per cent to 4 per cent. It has also confirmed its Land Transaction Tax holiday will not be extended beyond March.
Do you agree that the stamp duty holiday should be extended or gradually phased out for homebuyers stuck in the homebuying pipeline? Are you experiencing delays with your home purchase meaning you might miss out on the SDLT discount?