The property industry, along with thousands of hopeful homebuyers, is holding its breath today as we enter the last 48 hours of the stamp duty holiday.
The stamp duty holiday has thrown the UK housing market in pandemonium: prices are high and demand is even higher. It is, in no small part, thanks to the stamp duty holiday introduced by the government in the early days of the pandemic. On Wednesday, the holiday comes to an end.
The deadline has already been extended from March 2021, and will not come to a full stop on Wednesday, instead, it will be gradually phased out over the next few months, but thousands of homebuyers still wait anxiously to see what happens when the Wednesday deadline arrives.
What’s the worry?
The biggest fear is that buyers will start pulling out of their purchases due to no longer being able to take advantage of the generous tax break afforded by the holiday. If this happens, it could end up breaking hundreds of chains across the country, ruining the homebuying aspirations for thousands, some of whom started the buying process back in the Winter and Spring.
The end of the holiday means that some buyers are going to have to find up to £15,000 in extra cash, money they were hoping to save with the tax break. It goes without saying that very few buyers will have a spare £15,000 lying around, with the majority of people already borrowing mortgages for as much as they can possibly afford.
However, there are some who think the concern of toppling sales is unfounded and that Wednesday will come and go and the market will hardly change.
This is because there are many buyers out there who are exempt from stamp duty regardless of the holiday – first-time buyers under £500,000, for example. This demand will not disappear on Wednesday. Nor will the increased desire we’ve seen from people wanting to leave cities and live in the countryside. Add to that the number of buyers who will be able to afford an extra £15,000 and suddenly the amount of potential fall-throughs looks less daunting.
But it’s still worth acknowledging that house prices are incredibly high at the moment and when the stamp duty incentive is removed, people might start thinking twice about paying over the odds for a home whose value is likely to drop in the coming years due to how overinflated it is today.
Speaking in The Guardian, Rhys Schofield, Managing Director of Peak Mortgages and Protection, said:
“With hordes of potential buyers for every property hitting the market, even those sales that do fall out of bed will be snapped up very quickly. Buyers are champing at the bit for property.
“If anything, the stamp duty holiday spectacularly did its job to get the market moving after the first lockdown but it is now causing more problems than it solves, creating an artificial bottleneck that is now preventing other transactions from going through as conveyancers have been swamped by people trying to hit this deadline.”
So, as Wednesday approaches, we wait to see if the market is in for a crash landing, or a soft landing as the stamp duty holiday becomes a thing of the past. For thousands of us up and down the country, it’s the not knowing that’s most difficult to handle.