Cloe Atkinson, managing director, Mortgage Engine
The stamp duty holiday was introduced as a short-term measure to boost the property market and offer further support to buyers impacted by the coronavirus pandemic.
Since its announcement, the move has been met with open arms by aspiring buyers, and market commentators expect it to boost buyer confidence and transaction numbers – at least over the short term.
At Mortgage Engine, we want to urge the chancellor to capitalise on this positive momentum by extending the stamp duty holiday beyond March 2021, which could go a long way to incentivise pools of potential buyers and boost appetite in the longer term.
A group that could benefit significantly from an extension is first-time buyers in higher-priced areas such as London and the Southeast. With the current uncertainty as to when more lenders will return to the 90-95 per cent LTV space – products that typically appeal to younger buyers – it may not be until next year that many FTBs can secure the lending they need. Indeed, without an extension beyond March it could be too late for many of those looking at properties exceeding £300,000 to save on the moving costs involved. If extended, the stamp duty holiday could see demand from FTBs return to its pre-Covid level at a faster rate.
Another set of buyers that could be incentivised to make the most of an extension is downsizers. Those wishing to downsize before the stamp duty holiday came into force may have been deterred by the high moving costs. However, with an extension more downsizers may be motivated to move while they are less likely to face these charges. This could include older homeowners, which could also free up bigger properties for young families.
Lastly, buy-to-let investors could benefit. Landlords have been hard hit with tighter regulation and hiked taxes over recent years, but an extension to the stamp duty holiday could appeal to those wishing to grow their property portfolio.
The Office for Budget Responsibility said the chancellor’s latest move could boost housing transactions by 100,000 in 2020-21. This number could be even higher with the granting of an extension.
Rob Jupp, chief executive of The Brightstar Group
Any intervention in a market tends to come with unintended consequences and so I’m always nervous about government interference in the housing market
he objective behind the stamp duty holiday was clearly to stimulate property transactions as a means of kickstarting other areas of the economy. A lot of businesses benefit when someone moves home, so removing a barrier to encourage more transactions made a lot of sense.
It has worked, and there have been numerous reports of estate agents and brokers seeing a significant uplift in business, which we have experienced at The Brightstar Group. Most recently, Kinleigh Folkard & Hayward says it has received unprecedented demand from both buyers and sellers, with an 80 per cent increase in valuation requests and an 86 per cent rise in new-seller instructions over the past six weeks.
There are, however, unintended consequences. By creating a window of reduced tax liability, the chancellor has also created a race to squeeze into this window ahead of the March 2021 deadline. This is particularly true for expats and overseas investors who will have to pay a 2 per cent stamp duty surcharge on top of the standard rates from next April, and it’s putting upward pressure on prices.
A rush of activity is not necessarily a bad thing but the current system is saturated, leading to delays. Lenders are rightly taking a more forensic approach to each application. But they are also working at reduced capacity to facilitate social distancing and an increase in servicing requirements for existing customers. Consequently, despite the market having been closed for much of this year, many are looking to control business levels to protect their service, leading to rates creeping up.
Then there are valuation and conveyancing delays to consider, which are not too bad currently; but these services will come under pressure as we approach the end of the window.
After the deadline, we are likely to see a tail-off in demand as the market returns to more normal levels. At that stage, I would support a permanent reform to SDLT for homebuyers purchasing their main residence, and an announcement on this would be sensible sooner rather than later. It would help avoid the rush to make the window, and continue to stimulate the market, while enabling a more sustainable rhythm.
By Mortgage Strategy