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Tapered stamp duty holiday end could save £25bn worth of housing transactions

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  • 26/02/2021
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Tapered stamp duty holiday end could save £25bn worth of housing transactions
Tapering the end of the stamp duty holiday could preserve around £25bn worth of housing transactions and would potentially save buyers thousands of pounds each.

 

The figures come from multiplying the average Office for National Statistics UK house price of £251,500 by the 100,000 transactions at risk of collapse estimated by Rightmove in January.

In its house price index published earlier this week, rival estate agent Zoopla estimated that around 70,000 transactions could stall if they failed to complete by the 31 March deadline, which would mean around £17bn of collapsed deals.

Earlier this week The Times reported that chancellor Rishi Sunak was planning a three-month extension taking the stamp duty holiday deadline to the end of June.

However, professionals across the property sector warned this would simply kick the can down the road and repeat the cliff edge scenario later this year, instead they argued for a tapered approach to allow those deals in process to complete.

 

Support extension

Research from Money Supermarket suggested that around three-quarters of UK adults may support extending the stamp duty holiday.

It asked more than 5,000 people what action the chancellor should take with 74 per cent saying the holiday should be extended because it was helping the market, while 19 per cent felt it was no longer needed.

Earlier research commissioned by the comparison site found 63 per cent of prospective buyers were in the market due to the scheme, with a similar number saying they would change their buying plans if the scheme was not extended, while 24 per cent would withdraw from the market completely.

Money Supermarket spokeswoman Jo Thornhill said the research showed there was a clear appetite to extend the stamp duty holiday and echoed calls for it to be tapered.

“The policy has clearly proved popular with buyers, stimulating a boom in the market despite the challenging conditions in the wider economy,” she said.

“And, crucially, it has removed another cost for many first-time buyers, making that first step onto the ladder that little bit easier.

“While we welcome an extension, looking further ahead, a phased deadline where the benefits are gradually reduced would prevent a ‘cliff edge’ scenario which puts pressure on the market overall.”

 

£5,000 buying costs

Additionally, Legal and General Mortgage Club and Trussle estimate that prospective buyers could on average lose more than £5,000.

Estate agent fees of one per cent on the average property value plus VAT come to £3,018, plus £210 for valuation, £500 for the survey and £1,500 for legal fees comes to more than £5,000.

Kevin Roberts, director of Legal & General Mortgage Club said the holiday had accelerated the market but at the peak of activity it was taking up to 17 weeks to complete on a property purchase. “This means there are consumers who started their homebuying journey last year in the hope of taking advantage of the tax incentive, but who are now unlikely to complete before the current deadline,” he said.

“Some of these buyers might not have put aside the funds to pay for stamp duty, which could mean their purchase falls through.

“Overall, we would like to see a broader review of property taxes including SDLT to assess the different impacts on an evolving property market.

“Until this happens, we would encourage the government to consider a tapering of the scheme in the upcoming Budget, this would help to avoid the potential for significant disruption in the housing market. A smooth transition would also support future growth in the housebuilding sector, which has the potential to turbocharge growth as part of the government’s recovery plans.

Miles Robinson, head of mortgages at Trussle, added: “There will be a significant number of current buyers who are dependent on the savings from the holiday to be able to afford their house purchases, and it’s likely that many will pull out if they are unable to complete in time to meet the 31st March deadline.

“A tapered ending, that guarantees the holiday to buyers already in the process, could avert a situation where we see thousands of housing transactions collapse.

“With the Budget fast approaching, we’re calling on the government to consider taking another look at how to bring the scheme to an end.”

 

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