Stamp Duty cliff-edge will result in loss of billions
The property services industry stand to lose billions of pounds due to collapsed deals in the coming months due to the imminent stamp duty holiday cliff-edge, which threatens to deliver a considerable blow to the property market and the wider economy.
According to property analysts Twentyci, one in five of the 457,358 purchases made subject to contract at the end of 2020 are likely to fall through, whilst 31,250 of the 125,000 sales agreed this month will likely be abandoned.
The stamp duty holiday means homebuyers across England and Northern Ireland pay no stamp duty when purchasing homes up to a value of £500,000, with a reduced rate for homes above that. For someone buying a £500,000 property, the saving is worth £15,000.
The end of the holiday on 31 March 2021 has led to a backlog in transactions as the logistics of the housing market have not been able to keep up with demand, whilst many others have seen agreed upon deals fall through as homebuyers and sellers have pulled out amidst concerns that the transaction will not be completed prior to March 31st.
David Hannah, founder and principal consultant of Cornerstone Tax, discusses why the stamp duty cliff edge must be extended or softened in order to avoid a significant fallout for the property services industry, alongside sellers and buyers alike:
“The approaching end of the stamp duty holiday is already having a profound effect on the property market, sale collapses are approaching record highs and solicitors and conveyancers are already reporting that they expect to see a considerable drop in demand very soon. Many are expecting to be without anything to do by mid-February.
Calls to make the holiday permanent or scrap the tax altogether seem unrealistic given the levels of public debt and the £12 billion tax take it generates each year, but having such a strict cut-off point, particularly in such a turbulent and difficult housing market and economic climate could result in a a catastrophic drop in demand and prices.
Raising to the nil-rate band, to somewhere around £300,000, will benefit the majority of buyers without affecting a large amount in tax revenues, which is obviously key to the recovery of public finances. These statistics demonstrate the importance of keeping the market moving to other sections of the economy and first-time buyers, those likely to spend less than £300,000, are the driving force behind this movement.
Home ownership is key to the UK economy, upward mobility and the aspirations of many that are currently struggling to get on the property ladder. Not only this but making it easier to move house without being penalised for doing so will make it easier to move to areas of growth and where jobs are. Especially important as we see a de-urbanisation and migration away from cities in the wake of the pandemic.”
