House sales boom, overwhelming the supply chain and bringing the stamp duty holiday to a premature end

The stamp duty holiday, set to end next March, has led to record highs in the UK’s property market, with the number of sales surpassing pre-pandemic levels.

The measures save buyers an average of £4,400, with savings of up to £15,000 for properties valued at £500,000 or more.

There are concerns, however, that roughly 325,000 homebuyers who agree to purchase a property before the end of the year are expected to miss out on the stamp duty holiday, costing the economy more than £4 billion.

A dramatic rise in house sales since the introduction of the temporary cut in stamp duty during lockdown, have led to conveyancing, surveying, mortgage and search services being overwhelmed.

According to the property market analysts Twentyci, the average time it is taking from agreeing a sale to completion is five months, meaning that sales agreed now may not go through before the tax break comes to an end on March 31st.

Twentyci also calculated that if one in five buyers decides to pull out of their purchase because they will not complete before the deadline, the percentage of sales falling apart will rise from 23% – 53% by March, when taking into account the subsequent impact on purchase chains. The loss of 325,000 sales would cost the economy £4 billion.

David Hannah, Founder and Principal Consultant of Cornerstone Tax, discusses why the government needs to review this stamp duty holiday, to prevent the cliff edge of 325,000 people who believe they will still benefit missing out:

“It is critical that the government reviews this stamp duty holiday, and either announces an extension or amends the tax payment date so that homebuyers can still take advantage of the holiday even if they cannot complete by 31st March next year. The most preferable option would be a phasing out of the holiday, to avoid those who are currently in the process of purchasing their properties, essentially being thrown off a cliff-edge.

“Throughout other economic crises, stamp duty changes or relief have historically done very little to get the market moving again and there is no reason why it would help this time around either. It has been and still is a poor tool for managing market behaviour. With low-deposit mortgages almost disappearing altogether, people are having to assess their options.

“The government needs to do more to help get people get on the property ladder – government-backed purchase mortgage guarantees for borrowers would be a great way to reinstall confidence in the lending market. If the term of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security again, help buyers, and get the market moving again.”

 

Kindly shared by Cornerstone Tax

Main article photograph courtesy of Pixabay