Stamp Duty Deadline Sparks Frenzy in Property Market
A Frenzy to the wire – Stamp duty deadline loom – The real picture of the property market by Vinay Tanna – Managing Partner at Garner & Hancock
The Stamp Duty frenzy is at its peak and there are those who are intent on taking advantage of this giveaway as it ends on 31st March 2021. Or is it a true give away?
The Petition to the Government – Deaf ears
The Stamp Duty Land Tax holiday is due to end on 31st March 2021 and whilst a petition to extend it has topped 147,000 signatures; having spoken to many property professionals this extension is unlikely to be granted by the Chancellor. As for those who still want to try and get “under the wire”, I provide my views below on how to view the current market and the fall out after the deadline:-
If you work out the savings – Is it really a good deal?
Many estate agents have seen demand for property outstrip supply with house price inflation well above the normal range. As in any shortage, particular properties in desirable locations have increased in price rapidly. The maximum saving under the current scheme is £15,000 and this applies to properties priced in excess of £500,000.
According to government statistics the average house price increased over the year in England to £267,000 (7.6%), London’s average house price surpassed £500,000 for the first time in November 2020, equating to just over £2000 in SDLT or less than 1% of the purchased price. It follows that if the race to buy property in the current market results in an increase in price of more than 1% that buyer has lost money. Similarly, a price increase of more than £15,000 on any property will be a net loss to the buyer even if they get the full Stamp duty discount. Many estate agents have said there has been a slight slowdown of new business.
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Can you in reality make the deadline – Is it worth it?
Additionally, the increase in volume, generated by the stamp duty holiday has created a number of capability gaps. Solicitors are fully committed, Surveyors the same; banks and local authorities are struggling with the reduced capacity due to the pandemic forcing home working as well as an increase in the number of applications. This slows down the process, increases stress and makes buyers less discerning and more likely to accept sub optimal deals in the race to meet the 31st March deadline. For the vast majority of people a property is a home and the idea of having to be faced with a poor decision made under pressure. may haunt them for a long time.
Brace for the downturn
If, as some predict, the market slows down in the spring as the result of a combination of the pandemic, economic downturn and the ending of the SDLT holiday then there will be more choice and more bargains at a time when the capacity of the property industry to service buyers is increasing. This is a buyer’s market and if you are on the hunt for a property that is where you want to be.
Lessons from History
Last time, when there was a reduction in stamp duty back in 2017, and this rebate was removed, there was a fall in property prices from 5-15%. It is expected that there will be some adjustment in property prices but it all depends types of properties and local booms. Let’s not forget that the Covid crisis has prompted a rethink of how people work and there is evidence to show there has been a move to more country living.
We now watch with trepidation how the market will behave.
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