government rules out stamp duty reform

Buyers have until the end the end of this month to complete on their property purchases if they wish to benefit from the stamp duty holiday in full after the government ruled out calls to amend it. A petition, which had been signed by 13,500 people, tried to get the holiday amended so that buyers would benefit if they had exchanged rather than completed, giving people more time to take advantage of the concession. But it has been rejected by the government, which said the stamp duty holiday has already been extended once for those unable to complete by 30 March and would not be so again.

After 30 June, the tax break will start to be phased out until 1 October when it will be reinstated to the pre-Covid level of £125,000 in England and Northern Ireland, unless you are a first-time buyer.

Astounding market recovery

The influence of the stamp duty holiday on the surge in activity in the housing market over the past few months cannot be underestimated. The government introduced it with the aim of stimulating the property market, after property transactions fell by as much as 50 per cent during the initial Covid lockdown, and it has done that – and more. With Halifax reporting house prices jumping by 9.5 per cent in the year to May, and the average price of a home rising by more than £22,000, the market’s recovery has been nothing short of astounding.

At MT Finance, we have called time and again for the government to reform stamp duty at the higher levels, or even abolish it completely for downsizers. The latter move would free up countless family-sized homes for sale, enabling other buyers to move up the ladder. With the Royal Institution of Chartered Surveyors (RICS) revealing that the gap between demand for homes and supply is at its widest level since 2013, more homes for sale would help close this and assist in keeping house price growth in check.

The housing market is hugely important to the economy as both a multiplier and generator of significant income. The government needs it to function well as it’s a huge asset and significant source of revenue for the Treasury every year. However, all indications are that the government has no plans to reform stamp duty or extend the holiday.

Prices unlikely to fall off a cliff

The good news is that it looks as though it is not just the stamp duty holiday which is fuelling activity in the housing market so its ending shouldn’t result in a catastrophic falling off the cliff for prices. The economy is performing well and predicted to grow faster than expected this year as Covid restrictions continue to ease and the vaccination programme is rolled out.

The cost of borrowing is also extremely low, and likely to remain that way for a while at least. Lenders have plenty of money to lend and are keen to lend it, while the government’s 95 per cent mortgage guarantee scheme means that even high loan-to-value loans are now far more readily available.

Moreover, people have changed their attitudes to where they want to live and how much of their income they are prepared to spend on housing, with the latest Halifax report revealing that the pandemic could have changed the way we view our homes forever. It is not surprising that areas such as Wales and Yorkshire & Humber are seeing the biggest rise in house prices, as homebuyers hunt for gardens and increased space at affordable prices. Considerable government stimulus is helping propel the housing market but prices for houses with gardens are likely to continue to be strong long after this assistance has discontinued.

Optimistic outlook

The beleaguered British public are keen to take domestic holidays, if we can’t go abroad, and get back out to the shops, theatres and restaurants. This will drive spending and translate into consumer borrowing in the months ahead.

The stamp duty holiday has been great while it has lasted but we are still optimistic about the prospects for the economy after it ends – even if we believe there remains a strong argument for extending it.

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