Property owners everywhere rejoice! The Chancellor of the Exchequer, Rishi Sunak, announced on Wednesday that the government would be extending its temporary Stamp Duty holiday until 30 June following calls from industry experts and trade groups representing the property sector. Furthermore, to soften the impact for buyers who miss this deadline, Mr Sunak also announced that the nil rate threshold would not immediately drop from £500,000 back down to its usual £125,000; instead, it will sit at £250,000 for a further three months before finally returning to normal on 1 October 2020.
Why the extension?
Well, there are several reasons. The first is that the coronavirus crisis has endured much longer than anybody anticipated. When the Stamp Duty holiday was announced in July, the end of March seemed like plenty of time for things to right themselves. However, a second wave of the virus and a third lockdown have changed things, leading to a need for further support. Secondly, property experts have for some time now been concerned about the Stamp Duty holiday creating a ‘cliff edge’ effect, with a hard deadline meaning there is just a single day between significant tax savings and a large and unexpected bill. Lastly, the announcement in July caused a surge in buyer demand that conveyancers, mortgage lenders, surveyors and other actors in the transaction process have struggled to keep up with, leading to long delays and the risk of thousands of prospective buyers missing the deadline through no fault of their own. It is hoped that, with this new tapered approach, the Stamp Duty holiday can be more gradually phased out, leading to less of a rush (and less disappointment) in those final months.
The industry reacts
Buyers stuck mid-transaction will surely have breathed a sigh of relief on Wednesday – and for the most part, the property industry sighed with them. Tom Bill, head of UK residential research at estate agents Knight Frank, commented: “The extension is fair because completion dates for buyers and sellers have been jeopardised through no fault of their own.” Meanwhile, a finance expert at Moneyfacts.co.uk pointed out that the extension could prevent a wave of buyers from pulling out of their purchase if they miss the 31 March deadline.
However, some commented that it was an expensive measure at a time when the government is also acting decisively to fix the public finances after the government’s year-long borrowing spree, which has left the country facing unprecedented levels of debt. Laith Khalaf, a financial analyst at AJ Bell, said: “It’s not a cheap measure, estimated to cost the taxpayer around £1.6bn.”
Prospective property owners should consider their next move carefully
A six-month extension to the Stamp Duty holiday is excellent news for property buyers who are currently stuck mid-transaction and were facing the cliff edge of the March deadline. However, those looking to start their purchasing process should consider their next move carefully. The extension has been designed to smooth the transition back to normal and allow those whose purchase has been delayed to benefit from the tax break. It is not intended for those who have not yet put the wheels in motion. At the very least, buyers starting their search now should factor in the potential cost of a Stamp Duty bill into their budget to avoid a nasty shock if their transaction gets delayed.
With a surge in home purchases…
…comes a surge in property insurance demand! Rightmove estimates that there are currently 628,000 sales going through across the UK, meaning that thousands of property owners will soon need comprehensive property insurance cover to protect their new home against a variety of risks. At Focus, we offer a range of residential and commercial property insurance solutions; if you are experiencing increased demand for property owners insurance from your clients, please give us a call to see what we can do for you.
Sources:
https://www.bbc.co.uk/news/business-56268159
https://www.rightmove.co.uk/news/articles/property-news/stamp-duty-holiday-extension
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