The stamp duty holiday is set to end on 31st March. However, rumours are circulating that the Treasury is considering a three-month extension.
The Times has reported Chancellor Rishi Sunak is planning to extend the stamp duty holiday by three months until the end of June. Previously, the Telegraph reported that the chancellor was considering a six-week extension.
There has been growing pressure on the government to extend the stamp duty holiday. Currently, it is scheduled to end at the end of March. After an e-petition racked up over 100,000 signatures, MPs debated an extension to the temporary holiday. There was cross-party support for some form of an extension.
How has the stamp duty holiday impacted the housing market?
Announced in July last year, the stamp duty holiday has meant homebuyers haven’t had to pay any stamp duty on homes worth £500,000 or less. However, buy-to-let investors and second homebuyers still have had to pay the additional 3% stamp duty surcharge.
The temporary tax holiday has provided buyers and investors the opportunity to save up to £15,000. This boosted the housing market throughout the COVID-19 pandemic and caused many buyers to move forward plans to move.
Recent data from Zoopla revealed almost 750,000 homebuyers in England will likely benefit from the stamp duty holiday. Collectively, they will save nearly £5bn. And a total of 600,000 buyers will not pay any stamp duty at all, saving an average of £4,600 each.
The mounting pressure on the property industry
The stamp duty holiday has caused a boom in property sales with a record volume of transactions completing. However, this has put increasing pressure on numerous property professionals, including lenders, conveyancers and surveyors.
Many buyers and sellers are facing significant delays and have been worried they won’t complete their purchase before the deadline. Zoopla estimates 70,000 sales agreed in 2020 are at risk of not completing by the end of March.
Buyers who were expecting to complete before the deadline may face unexpected tax bills. This could lead to a substantial number of property transactions falling through. It could also cause a “cliff edge”, making the housing market grind to a halt.
Paul Broadhead, head of mortgages and housing at the Building Societies Association (BSA), says: “The Stamp Duty holiday not only enabled a return to a fully functioning housing marketing, it’s likely to have had much wider economic benefits as new homeowners increase their spending on furniture, appliances and ancillary services such as removal companies, cleaners and decorators. The Chancellor will also have reaped some reward through the associated VAT payments.
“However, the unprecedented increase in property transactions, which together with the necessary Covid-19 restrictions, have resulted in unexpected delays in completing house purchases. Those already in the house buying process anticipate benefiting from the rate reduction and should not penalised because of Covid-related delays in the process that are completely out of their control.”
What would an extension mean for the sector?
Yesterday, the BSA called for a tapered end to the scheme for those already in the homebuying process. The association said a three-month extension will help buyers complete in time to benefit from the tax reduction. It would also relieve pressure on lenders and conveyancers.
“It would be unfortunate if the positive effects of the Stamp Duty holiday unravelled for the sake of a short extension,” Paul Broadhead comments. “A three months tapered end, similar to the one announced this week for the Help to Buy: Equity Loan, is therefore a small but necessary change.”
The Treasury has not confirmed that there will be an extension to the stamp duty holiday. Rishi Sunak will make an official announcement on the deadline during the Spring Budget on 3rd March. Many buyers, sellers and property professionals will be eagerly awaiting his statement.