With the end of March fast approaching, so too is the stamp duty holiday deadline, a moment which will mark the end of the substantial tax cut homebuyers have enjoyed for the best part of a year when buying homes. As the March 31st deadline nears, there is concern throughout the industry that market demand will fall off a cliff edge and that, as a result, the UK housing market will crash.
As such, experts from around the industry and beyond have been suggesting alternatives to simply stopping the scheme all at once and risking a market crash as buyers rapidly abandon ship.
Today, The Building Societies Association (BSA) has added its opinion to the pile, suggesting that stamp duty should come to a tapered, gradual end instead of coming to a complete halt overnight on March 31st.
The BSA is hoping to persuade Rishi Sunak, who is due to announce the new national budget next week, that when the current deadline expires on 1st April, those buyers who are ‘already in the process of buying a new home’ should be allowed to complete the sale with the current tax incentives in place.
Diving deeper into the suggestion, the BSA says that the tapered end should be available to those buyers who have already had a mortgage approved and granted by the end of March deadline. These buyers should then be given a three month grace period to complete the sale/purchase with complete SDTL holiday benefits.
Paul Broadhead, Head of Mortgages and Housing at the BSA said:
“The Stamp Duty holiday not only enabled a return to a fully functioning housing marketing, it’s likely to have had much wider economic benefits as new homeowners increase their spending on furniture, appliances and ancillary services such as removal companies, cleaners and decorators. The Chancellor will also have reaped some reward through the associated VAT payments.
“However, the unprecedented increase in property transactions, which together with the necessary Covid-19 restrictions, have resulted in unexpected delays in completing house purchases. Those already in the house buying process anticipate benefiting from the rate reduction and should not be penalised because of Covid-related delays in the process that are completely out of their control.
“It would be unfortunate if the positive effects of the Stamp Duty holiday unravelled for the sake of a short extension. A three months tapered end, similar to the one announced this week for the Help to Buy: Equity Loan, is, therefore, a small but necessary change.”
Is the concern justified?
Some experts are suggesting the stamp duty holiday be extended indefinitely in order to keep the housing market moving until the Covid-19 pandemic is well and truly over and business and life can continue as normal.
Some experts say the holiday should be ended as soon as possible because the losses the government is accumulating by not charging land tax is significant and will, somehow, need to be ratified.
This will likely mean increased taxes. If so, it would essentially mean that non-homeowners are paying for wealthy homeowners to be able to buy cheap houses and getting nothing in return except an even large privilege gap up and down the UK.
Another way of looking at the stamp duty deadline is with calm, rational, data-led eyes. One-third of homebuyers are first-time buyers and therefore do not pay stamp duty anyway. Roughly another third have explicitly stated that the tax break is NOT a motivation for moving home and that they will continue to proceed with their plan even if the holiday ends.
Even if the holiday were to end overnight, it’s unlikely that the housing market would crash. Instead, growth would slow and perhaps level off, but people will keep moving home. Houses will continue to be bought and sold.