Some major property industry players have urged the government to offer a stamp duty holiday to buyers. Could this be key to recovery after COVID-19?
Stamp duty is a much-debated issue affecting the UK housing industry. Homebuyers must pay the tax on any property purchase above a certain level, with exceptions for first-time buyers. Property investors and second-homeowners are liable for an extra 3% surcharge on top of this.
While it is accepted as par for the course for anyone buying property in the UK, many in the industry have called for it to be changed or reduced over the years. The most recent alterations for first-time buyers have been popular, but many think more could be done.
Reduce stamp duty to help the market
Now, in light of the potential slow-down in the market caused by COVID-19, two industry bodies have asked for a review. The Royal Institute for Chartered Surveyors (RICS) was the first to ask the government for a stamp duty holiday once the lockdown ends. The National Federation of Builders (NFB) has since backed this up.
The request follows the latest RICS predictions. They show a large net balance of its members believe house prices could fall over the next 12 months. One of the major influencing factors in this is transaction numbers. As less people are inclined to buy at a high price due to lack of confidence, sellers are pushed to reduce their prices.
Hew Edgar, head of government relations at RICS, thinks an intervention is necessary.
“Rics is not an organisation that would call for a stamp duty holiday on a whim. As we start to emerge from this crisis, however, it is likely that the finances of potential homebuyers will be under strain, and the burden of stamp duty could put buyers off.
“For those who can afford to move they may lack confidence in the market, adding to the slow down. A stamp duty holiday could be one of the ways to reactivate the housing market quickly as a short-term measure.”
Boosting new-build sales
Some housebuilding is continuing through the lockdown. The government has not ordered sites to close down unless workers are unable to follow social distancing rules. It is also supporting house moves if they have already started, or if the property is empty. This applies to the majority of new-build sales.
However, builders are also calling for a stamp duty holiday to encourage sales once the current activity slows down.
Richard Beresford, chief executive of the NFB, said: “A temporary stamp duty holiday would encourage new-build sales and release some much needed cashflow back to our struggling housebuilders.”
“It would also ensure vital businesses, such as surveyors and conveyancers, are able to continue operating in these difficult times. We support it.”
Rico Wojtulewicz, head of housing and planning policy at the House Builders Association (HBA), the housebuilding division of the NFB, agrees. He argues that builders must still pay bills, staff and supply chains. Many are struggling to get lending from the CBILS scheme, and revenues are reduced.
He adds: “A temporary stamp duty holiday is another immediately deliverable solution that the government should pursue. Any delay in increasing support to our industry will see businesses go to the wall and once one goes, the domino effect will be striking.”
The government has taken a number of emergency measures to help people and businesses during the pandemic. For example, mortgage holders can take a three-month payment holiday, including landlords. Financial support packages and loans are also helping thousands of businesses across the UK. Many employers have “furloughed” their staff until further notice, which is another government-backed scheme. While the housing industry could also feel the effects of coronavirus, it remains to be seen what support will be offered by the government.