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Do we really want an extension to the stamp duty holiday?

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There’s one thing on most of our minds this week ahead of the budget… STAMP DUTY. I wanted to share a few thoughts on it.

Stamp duty holiday: Pros & Cons

"

Would a stamp duty extension be a good thing?

There’s one thing on most of our minds this week ahead of the budget… STAMP DUTY. I wanted to share a few thoughts on it.

The Stamp Duty holiday only has about 4 weeks left to go, and the Government’s under a huge amount of pressure to extend the deadline.

This seems like it would be a good thing:

  • Buyers paying less in tax means higher offers, resulting in more sales
  • Everyone’s been enjoying this the last few months: Sellers, buyers, agents and solicitors alike.

But… is that a good thing?

It could further-inflate this bubble

For one, it's probably not sustainable.

Taxes will need to go up – not down – to help cover the expensive COVID relief that taxpayers have funded the last 12 months, so it looks like this Stamp Duty tax cut can’t be permanent.

So if prices are at all-time highs, but it can’t be permanent, then we’re in a bubble

How long do we really want to keep pumping a bubble up before we let it pop?

So while the Stamp Duty incentive looks like a huge positive, if the Government keep stoking the flames of the housing market it could be a bad thing for all of us…

The three main concerns for me personally:

#1 - No extension means sales will fall through

Rightmove estimate that 100,000 sales have been agreed by purchasers who budgeted for the stamp-duty saving, but are going to miss out due to delays.

We surveyed 3,717 homebuyers back in January, and 39% told us they’d need to pull out if they missed the stamp duty deadline. This could be a disaster for buyers, sellers, and agents if these sales can’t all be renegotiated.

When this happens, we'll likely see a spike in demand for our "sell my house fast" service - which can help sellers get their plans back on track if their house chain has fallen through. This can be good for us - but not for the wider housing market.

#2 - An extension means delaying the inevitable

However, extending the stamp duty deadline doesn’t exactly solve this… It just pushes the cliff back so another batch of buyers are affected instead.

Wellbeing also needs to be a consideration here… Solicitors have been under unbelievable pressure to keep up with demand over the last 6 months, and as Tom Parkinson, Head of Property at Rowlinsons Solicitors mentions here on LinkedIn, they can’t be expected to keep this going indefinitely.

#3 - An extension will make homes even less affordable for FTBs

Prices rising to record highs may feel great for homeowners, but it makes property even more unaffordable for those saving to get on the housing ladder.

Stamp duty has been a disaster for First Time Buyers. It has saved them around £2,300 on the average purchase, but has driven prices up by £13,000.

We did some research in the past couple of weeks, and found that the time it’s taking for first-time buyers (FTBs) to save for their first home has grown by three years in some parts of the national property market, and now exceeds 11 years in some places.

Using tax incentives to fuel further house price growth doesn’t exactly make the market more accessible to younger generations.

The answer could be a tapered system

In a tapered system, sales agreed before 31st March (or some earlier date) will still get the Stamp Duty saving, but those agreed afterwards won’t.

It saves those sales that have already been agreed, eases the pressure on solicitors and the wider system, and stops stoking the flames of house price growth…

In other words, it could be a “controlled landing” back to normality…

"

Would a stamp duty extension be a good thing?

There’s one thing on most of our minds this week ahead of the budget… STAMP DUTY. I wanted to share a few thoughts on it.

The Stamp Duty holiday only has about 4 weeks left to go, and the Government’s under a huge amount of pressure to extend the deadline.

This seems like it would be a good thing:

  • Buyers paying less in tax means higher offers, resulting in more sales
  • Everyone’s been enjoying this the last few months: Sellers, buyers, agents and solicitors alike.

But… is that a good thing?

It could further-inflate this bubble

For one, it's probably not sustainable.

Taxes will need to go up – not down – to help cover the expensive COVID relief that taxpayers have funded the last 12 months, so it looks like this Stamp Duty tax cut can’t be permanent.

So if prices are at all-time highs, but it can’t be permanent, then we’re in a bubble

How long do we really want to keep pumping a bubble up before we let it pop?

So while the Stamp Duty incentive looks like a huge positive, if the Government keep stoking the flames of the housing market it could be a bad thing for all of us…

The three main concerns for me personally:

#1 - No extension means sales will fall through

Rightmove estimate that 100,000 sales have been agreed by purchasers who budgeted for the stamp-duty saving, but are going to miss out due to delays.

We surveyed 3,717 homebuyers back in January, and 39% told us they’d need to pull out if they missed the stamp duty deadline. This could be a disaster for buyers, sellers, and agents if these sales can’t all be renegotiated.

When this happens, we'll likely see a spike in demand for our "sell my house fast" service - which can help sellers get their plans back on track if their house chain has fallen through. This can be good for us - but not for the wider housing market.

#2 - An extension means delaying the inevitable

However, extending the stamp duty deadline doesn’t exactly solve this… It just pushes the cliff back so another batch of buyers are affected instead.

Wellbeing also needs to be a consideration here… Solicitors have been under unbelievable pressure to keep up with demand over the last 6 months, and as Tom Parkinson, Head of Property at Rowlinsons Solicitors mentions here on LinkedIn, they can’t be expected to keep this going indefinitely.

#3 - An extension will make homes even less affordable for FTBs

Prices rising to record highs may feel great for homeowners, but it makes property even more unaffordable for those saving to get on the housing ladder.

Stamp duty has been a disaster for First Time Buyers. It has saved them around £2,300 on the average purchase, but has driven prices up by £13,000.

We did some research in the past couple of weeks, and found that the time it’s taking for first-time buyers (FTBs) to save for their first home has grown by three years in some parts of the national property market, and now exceeds 11 years in some places.

Using tax incentives to fuel further house price growth doesn’t exactly make the market more accessible to younger generations.

The answer could be a tapered system

In a tapered system, sales agreed before 31st March (or some earlier date) will still get the Stamp Duty saving, but those agreed afterwards won’t.

It saves those sales that have already been agreed, eases the pressure on solicitors and the wider system, and stops stoking the flames of house price growth…

In other words, it could be a “controlled landing” back to normality…

IN THE NEWS

Browse coverage of this news piece

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