News

 

Budget Fillip for Housing Market


3 Mar 2021

 

The Chancellor, Rishi Sunak, confirmed on 3 March in his Budget address to Parliament that the Stamp Duty Land Tax (SDLT) holiday would be extended beyond the end of March. This had been widely anticipated (Stamp Duty Holiday Extension, 19 February, 2021) with industry pundits predicting an extension til the end of May.

 

The outcome delivered by the Chancellor surprised on the upside with the current provisions, in force since 8 July, 2020, to be maintained through til 30 June. There follows a further three month tapering that will benefit those buyers purchasing residential property in England up to £250,000 in value. The Chancellor noted that the extension “was to smooth the transition back to normal - and we will only return to the usual level of £125,000 from 1 October”.

 

The SDLT rates are as follows:

Property Value

8/7/20 – 30/6/21

1/7/21 – 30/9/21

1/10/21 onwards

< £125k

Nil

Nil

Nil

£125,001 - £250,000

Nil

Nil

2%

£250,001 - £500,000

Nil

5%

5%

£500,001 - £925,000

5%

5%

5%

£925,001 - £1,500,000

10%

10%

10%

£1,500,001+

12%

12%

12%

 

Early in the new year the government found itself under increasing pressure from sectors of the housing industry to extend the SDLT holiday. At the time the government showed little appetite for reacting favorably. The standard line trotted out was that the initiative was only intended to be for a limited time. So, what changed in the intervening two months?

 

Firstly, the government would have been concerned about the financial impact, both at an individual level and in aggregate. At stake is a £15,000 saving on a £500,000 purchase. Rightmove estimated that 100,000 homebuyers were at risk of missing out on the windfall if the March deadline remained fixed. Viewed in broader context, Rightmove estimated in early March that 628,000 sales had yet to complete and that approximately 20% of sales from when the scheme was launched back in July 2020 had yet to complete. 

 

As Rightmove data showed, the problem was the time it was taking for sales to complete. On average it was taking 65 days from property listing to offer acceptance and a further 126 days to reach legal completion. The challenge for property surveyors, conveyancers and loan companies of processing the increased volume of sales was compounded by the protracted lockdowns and work from home provisions.

 

It is also probable that the government deliberately held back the announcement til the Budget was released in order to frame this initiative as part of the broader pandemic related package of fiscal relief. The other factor that would have weighed on the Chancellor's mind was that the SDLT holiday was largely held responsible for the average price of UK property surging by 8.5% in 2020. With fears already in evidence that property prices are set to fall in 2021 as this artificial stimulus is withdrawn, the government would have been concerned that an earlier announcement would further overheat the market.

 

This risk will be compounded by the Budget announcement of another government-backed 95% Help to Buy mortgage guarantee scheme for properties valued up to £600,000. This scheme will be open to all buyers, not just first home buyers.