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The stamp duty holiday was introduced in July 2020 just as the country was coming out of its first coronavirus lockdown to encourage people to purchase homes. It meant that home buyers could be saving up to £15,000 if they move before the deadline.
As the country took a financial hit during the pandemic causing the economy to slow dramatically, the introduction of the stamp duty holiday was an attempt to boost the property market which had suffered as a result of the lockdown.
During the period of July 2020 to March 2021, the stamp duty threshold was increased to £500,000 however the increase in demand for properties led to significant delays to the home buying process and a further extension was granted. The holiday was extended to prevent hundreds of thousands of property sales and purchases falling through which would enable solicitors to work through the backlog of sales owing to the increased market activity. The stamp duty holiday that was originally due to end on the 31st March 2021 was extended to the 30th June 2021 in England. The stamp duty holiday ended in Scotland on 31st March 2021 and will be ending in Wales on 30th June 2021.
It is no secret that the stamp duty cut has led to a greater demand for properties and higher property prices. It has boosted the property market which was immensely suffering.
Whilst the extension was a bid to help homebuyers, it pushed house prices further out of reach. It has also caused problems with affordability as buyers were already struggling to find somewhere they could afford before the holiday.
It is clear to see that many people did however benefit from the holiday and its extension. This is shown by data from HM Revenue and Customs (HMRC) that 190,980 sales went through in March 2021 alone which was almost double the number recorded than the year before and 32% more than in February. Data from Rightmove shows that the average number of days it took to sell a property fell to just 49 in November, compared to 67 a year earlier. Figures from Zoopla estimate that at least 740,000 purchasers will have benefited from the stamp duty cut by the time it ends.
Stamp duty land tax will still be payable however the starting rate will be upped to £250,000 until the end of September before returning to its usual threshold of £125,000 on the 1st October or £300,000 for first time buyers purchasing a property worth up to £500,000.
This is what stamp duty rates will look like after the holiday ends:
|Stamp duty rates for period of 1st July 2021 to 30th September 2021||Stamp duty rates for period from 1st October|
|Properties priced up to £125,000||0%||0%|
|Properties priced £125,001 - £250,000||0%||2%|
|Properties priced £250,001 - £500,000||5%||5%|
|Properties priced £500,001 - £925,000||5%||5%|
Stamp duty is unlikely to be extended due to the chancellor’s clear route of returning stamp duty to normal levels. As much as this has helped the property market, it is not a viable option long-term with the government losing out an average of £11,566 per property purchase.
To continue the ongoing demand for properties after the stamp duty holiday ends, a 95% mortgage guarantee scheme was announced allowing potential buyer to seek properties with only a 5% deposit. However, this will only be for properties worth up to £600,000 and normal stamp duty rates will still be applicable.
There is a continued uncertainty over what will happen next with the coronavirus pandemic and therefore we cannot get a clear and precise picture of what will happen to house prices or the market. There is a predicted short-term slowdown in the property market however it is doubtful that this will have an instant impact on property prices. With this in mind, it might slow down the property market and make it more challenging to sell.
Whatever you decide to do, Glanvilles LLP would be happy to assist you in the purchase or sale of your home. Get in touch with our Residential Property department in Chichester, Fareham or Havant by giving us a call or filling in our online enquiry form.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice, and should not be relied upon as advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. All content was correct at the time of publishing. Legal advice should always be sought in relation to specific circumstances.