The petition for the extension of the stamp duty holiday garnered close to 140,000 signatures, prompting the government to further look into the matter.
Originally slated to end on 31 March, the stamp duty holiday has enabled more people to afford to buy new homes by giving them the opportunity to save up to £15,000. Stamp duty is the tax paid when homeowners buy a property or land in the UK that’s worth more than a certain value.
With the impending deadline moving closer, many buyers have been rushing to beat it, resulting in increasing pressure on property professionals, many of whom have been dealing with an increased number of transactions.
If not extended, purchasing a home priced from £125,000 to £500,000 could mean a tax bill for buyers.
Key Points to Consider
The Likelihood of an Extension
While we have to wait until 03 March for Chancellor Rishi Sunak’s Budget Day speech to find out whether or not the stamp duty holiday will be extended for six more months, Labour MPs have shown their support for the extension during the latest Parliamentary debate.
This is in part due to the petition for an extension, which garnered hundreds of thousands of signatures. The government has remained tight-lipped regarding the matter, and nothing has changed yet. However, many remain hopeful that it will see an extension.
Those who oppose the extension cite that while it enabled the property market to be resilient during the pandemic and protected thousands of jobs in the industry, it might cause the Treasury to be deprived of much-needed funds in light of these uncertain times.
The stamp duty holiday has already cost the government more than £3 billion.
Effects of a Cliff-Edge Stop Date
Without an extension on the legislation, many buyers are more likely to miss out on tax savings. This, in turn, can lead to many transactions falling through, setting a chain reaction that could lead to chains collapsing, reduced investments and house prices falling sharply.
Property professionals and homeowners are already feeling the effects of the approaching deadline. House price growth has started to slow down and many property sales have already fallen through. There’s also a higher likelihood of buyers cancelling planned moves, should they pay stamp duty.
A cliff-edge stop date will increase the likelihood of transactions not going through. A tapered stop date, however, will more likely lessen the pressure of the cliff-edge stop date, giving those with exchanges and mortgages the opportunity to benefit from the holiday, given that the completion is attained within a reasonable timeframe.
The stamp duty holiday heralds an upward trajectory for price growth, leading to a wider scope of long-term capital growth. But, this may not be as sustainable as we think it might be.
Stamp duty savings allows buyers to spend more on properties, leading to increased property prices. But this is an artificial growth that’s fuelled by buyers being able to spend more money, and not by demand. Once the relief ends, property prices will return to their equilibrium prime or fall sharply.
Possibility of Other Tax Hikes
Tax hikes to make up for the extension are expected to be shelved. With the nation facing severe lockdown restrictions and the threat of a recession, introducing tax rises is made more difficult.
The Impact of Stamp Duty Holiday on First-time Buyers
Demand in the housing market has grown strong, particularly in the first-time buyer market. Existing homeowners have been encouraged with the stamp duty holiday to sell their properties, opening up new opportunities for first-time buyers in general.
Finding the right space to live in is always a challenging endeavour. Those who are still looking to buy or sell a property within the stamp duty holiday period can optimise their search with the help of a unique platform such as revvis that will help bring these properties to life. With revvis, property experts can showcase their property in 3D and present or view a 3D visualisation of its spaces to buyers, enabling them to make better and more informed purchase decisions.