So the rumours were true. The Times is reporting that chancellor Rishi Sunak is set to extend the stamp duty holiday until the end of June when he announces the Budget on 3 March. Although it’s not yet clear whether the extension will apply to all new purchases or just those agreed before a certain date, this news will be a relief to those fearing a sudden property crash. So wipe that sweat away from your forehead and relax … at least for now.
There’s no doubt that the stamp duty holiday has been a lifeline since it was announced last year. It turned what could have been a Covid-related catastrophe into an unexpected bonanza. However, with thousands of transactions struggling to complete before the original deadline, there were growing numbers of buyers either pulling out or trying to renegotiate. And such practices are tantamount to pulling the rug from under agents’ revenues.
Consequently, Rishi’s remedy seems well-timed. According to Rightmove, the extension could benefit approximately 300,000 sales. What’s more, it will prevent 100,000 people who actually agreed their purchases back in 2020 from missing out on the tax savings. The only people, or rather person, who will be missing out as a result is the Chancellor himself. It’s estimated that extending the stamp duty holiday could cost the exchequer £1.75 billion. That’s a rather large wedge of wonga.
The right decision?
Sunak’s significant intervention recognises that the stamp duty holiday was an invaluable crutch not only for the property industry but also the broader economy as a whole. The extension will protect thousands of jobs and, most importantly, give the industry a stay of execution re: the cliff-edge that so many agents have dreaded. So what has the response been from the industry’s big boys?
Thus far, property professionals have welcomed the move. After all, thousands of people were set to miss the deadline through no fault of their own. The surge in demand caused by the stamp duty holiday has overwhelmed agents, conveyancers, and lenders alike – so much so that the time between offer and completion has averaged as much as 22 weeks since the Stamp Duty Holiday began last July. The normal average is just 12 weeks.
With Rightmove predicting that as many as one in five sales agreed back in July would not meet the original deadline, the chancellor’s extension seems only fair. However, property professionals and metaphor mixers are insisting that a simple extension, with no further measures, might simply end up kicking the cliff edge down the road. As a result, many industry leaders are imploring the Chancellor to end the Stamp Duty Holiday in a staggered way.
An esteemed proponent of this staggered approach is Mark Hayward from Propertymark. Here’s how he made his case in The Telegraph:
"Extending the holiday until June will create another cliff edge. We know from our own research that the majority of estate agents expect to see an increase in the number of failed sales if the stamp duty holiday ends at a cliff edge, so we need Government to consider a tapered end to the holiday so that buyers aren’t forced to pull out at the last minute and the property market can continue to thrive”
It will be interesting to see what the Chancellor ultimately decides to do. Will he extend the Stamp Duty Holiday for everyone or restrict access to those who agreed mortgages before a certain date? Either way, a staggered walk down the cliff towards calmer seas seems preferable.
With the Stamp Duty Holiday being extended for another three months, some wonder whether it should be extended even further. The Centre For Policy Studies, for example, has called on the government to either permanently increase the threshold to £500,000 or abolish stamp duty altogether. Although such a move might go down well in certain quarters, it’s unlikely to impress everyone.
It’s worth remembering, of course, that some people believe the Stamp Duty Holiday has created a bloated and false housing market that’s bad for first-time buyers. What’s more, they fear that extending the deadline will simply inflate prices even more with the end result being an even bigger crash when the Chancellor’s generosity finally runs dry. What’s more, others worry that introducing deadlines tempts buyers to rush through purchases without the necessary searches or proper valuations.
Overall, however, these people seem to be in the minority. Ending the Stamp Duty Holiday now was always going to be a big risk. It makes much more sense to wait until the end of June, when the government hopes to lift Covid-19 restrictions once and for all. It’s hoped that the pain of rising unemployment and the damage this will do to the housing market might be softened if the economy is starting to recover by then. Here’s hoping, anyway.