stamp duty holiday set to boost housing market
At MT Finance, we have been suggesting for some time now that the Chancellor should introduce some sort of stamp duty holiday to help kick-start the housing market as it emerges from its prolonged lock-down. Yesterday, he did just that, introducing a stamp duty holiday from midnight on 8 July.
Until 31 March 2021, there will be no stamp duty to pay on the first £500,000 of any transaction – benefiting first-time buyers, second steppers, investors, those buying a second home or via a limited company. Those who already own a property will still have to pay the 3 per cent surcharge on the entire purchase price but it will still result in a significant saving of up to £15,000.
The stamp duty holiday will be a huge boost to the housing market. With property prices falling recently, according to the Nationwide and Halifax house-price indices, the Chancellor wanted to give the market the kick-start it needs. While many first-time buyers are already exempt from paying stamp duty (there is none to pay on purchases up to £300,000), the increase in the exemption to £500,000 will be particularly welcome in London and the southeast where values are higher.
Many first-time buyers will now be encouraged to buy, taking advantage of high loan-to-value mortgages and low rates to support their purchase. With second-steppers and other home movers also included in the tax break, it means that the homes first-time buyers want to buy will be freed up as those already on the ladder move up it. This should improve stock levels, which have been low until recently, as sellers realise that now is the time to strike if they wish to buy a bigger home.
It was also a sensible move to announce that the stamp duty holiday would come in with immediate effect. When the plans were rumoured in the press earlier in the week, it was suggested that the tax break would be introduced in the autumn, which would have slowed the market down considerably over the summer months. Now buyers can move with confidence, knowing that they could save thousands of pounds which can go towards their deposit.
While we welcome the developments, more could still be done. Stamp duty has been an obstacle to home purchase for a few years now, and this payment holiday at the lower end is a great first step. However, the stamp duty regime is still oppressive, particularly at the top end of the market, and we would like to see some tweaking here. Doing so would enable the Government to boost transactions and in turn generate more income from stamp duty for the coffers. The wider economy would also benefit as for every prime or super-prime property bought, a considerable amount of money is then spent on developing and refurbishing, resulting in the employment of many builders, plumbers, electricians, architects, advisers and the like. One hopes this might be included in the next Budget in the autumn but for now, Rishi Sunak has got off to a very good start.