The Chancellor’s recent announcement of the stamp duty land tax holiday to homebuyers in England and Northern Ireland means that buyers of homes valued at up to £500,000 will no longer pay any stamp duty on the purchase.
In the wake of Covid-19, the stamp duty holiday is intended to boost and revitalise a somewhat damaged housing market. Following predictions that the housing market would crash; the Chancellor hopes that this new measure will give the housing market the kickstart it needs.
Experienced property investor, Rex Ekaireb commented on the Stamp Duty holiday: “This is a great move by the government to inject a little urgency into the property market and to get people back to making those vital property purchases the UK economy so badly needs.”
Rex Ekaireb continued: “Coronavirus had a big effect on the property industry with so many hit hard, including not just landlords and tenants but also those providing services in the industry like the tradespeople who help the industry tick. Getting the industry moving again has been, and remains vital for the UK economy.”
According to the Chancellor, the average buyer could stand to save up to £2,000 as a result of this new measure.
Stamp Duty Land Tax, more commonly known as stamp duty, will be cancelled on the purchase of all properties up to half a million pounds. Before this holiday, stamp duty was applied to all purchased properties, with the tax dictated by the purchase price of your property, the percentage of stamp duty you pay will be decided by the price bracket your property falls into (source: Money Savings Advice).
For example, a 2% charge applies to the slice of property between £125,000 and £250,000, so if you were buying a home in England for £240,000, you will now be saving £4,800 in stamp duty.
Rex Ekaireb says: “By slashing Stamp Duty for millions across the country, capital, as well as urgency has been injected into the market and for those looking to buy and sell, it has already made a huge difference and that is to be celebrated.”
Ekaireb also said: “There will be countless people and families who have been waiting to complete on properties and this is a wonderful boost to all of those people. Also, for those who have been waiting on property loan, such as renovation and improvement loans, this may be the kick the industry and indeed the home owners need.”
However, there are questions about whether these savings will actually reach buyers. During the last stamp duty holiday, in the 2008 recession, the evidence seemed to suggest that buyers weren’t getting the full benefit of this tax break. Because property sellers knew the buyers would not need to pay stamp duty, it seems they were more likely to keep asking prices high. Who benefits from this stamp duty holiday will depend on the negotiation skills of the seller and the buyer, but it seems as though often the buyer pockets about half of potential savings.
So, what effect does stamp duty seem to be having on the housing market now that we are out of lockdown?
Alan Cleary, group managing director at OneSavings Bank for mortgages says: “The stamp duty holiday has clearly provided a further boost to affordability and has naturally stimulated demand. With supply having returned to more normal levels, overall levels of transactions can be expected to increase materially in the coming months.”
In Halifax’s latest house price index, house prices increased by 1.6% from June to July. This represents an annual change of +3.8% from 2019, suggesting the start of a “mini-boom” in the market.
According to Halifax managing director Russell Galley, the government’s stamp duty cut has supported the post-lockdown spike. He says that confidence is currently growing and the future looks “brighter than expected”.
Legal & General Mortgage Club director Kevin Roberts said: “The latest stamp duty holiday proposals look to be another step in the right direction and make for positive reading for first-time buyers.
“Our new research suggests that first-time buyers could be the engine that drives the housing market forward this year, with 93 per cent still planning to purchase a property in 2020.”
Stamp duty holiday will help more people in the UK get onto the property Ladder and perhaps more importantly, support the multi-billion UK property market in Bouncing Back from the devastating effects of covid-19 on our economy.