• Rhys Hathaway

Stamp Duty Holiday Ending Too Soon? Will This Cripple The Housing Market???

Are you anxiously waiting for a property sale to complete before the 1st of April 2021 to beat paying Stamp Duty?

The Stamp Duty holiday was firstly introduced on the 8th of July 2020. Since it was introduced, the housing market has boomed as house prices have increased by 4.7% so, all good news? Unfortunately not!

When the Stamp Duty holiday was introduced there was an extreme increase in mortgage applications.

Last year, we spoke to a variety of financial advisers and mortgage brokers with regards to this. They had confirmed that many of the high street lenders were extremely backlogged due to the increase in demand and in addition the staff being on furlough. This was causing buyers to worry that their mortgages would not be approved in time to qualify for the Stamp Duty holiday.

There is still a significant backlog with regards to mortgages and many applications still may not be approved in time to qualify for the Stamp Duty holiday. This will result in property offers being withdrawn and an increase in properties coming onto the market.

When buying a house, the time it takes to complete is like picking a name out of a hat. It’s anyone's guess for how long it will take. Many properties can take up to six months to complete! Several buyers are only moving NOW because they can currently afford to due to the stamp duty holiday. If for any reason you haven't completed by the 1st of April 2021 you will have to pay Stamp Duty. This in turn will cause many offers to be withdrawn and a rise in properties coming onto the market.

Currently, the housing market is on the up! However, if thousands of property sales fall through this could lead to a saturated market and a resulting decrease in prices due to there being too many properties to compete with.

Unfortunately, if one property sale falls through its most likely more will too. This is because the majority of house sales are in chains, as owners need to sell their homes before they can buy another. In my experience you can have house chains of more than four. If the seller has their heart set on a particular house, they will need to sell their property fast turning to the likelihood of reducing the price of their property to increase the probability of an offer. This may happen all over the country which could lead to house prices falling everywhere. So, it would be an unfortunate chain of events!

Many properties when valued have the Stamp Duty holiday factored in. If the property hasn't sold before the 1st of April 2021, the property will become overvalued due to the populated property market therefore, the likelihood of that property selling for a good price could be very low!

A petition was created to have the Stamp Duty holiday extended. The petition passed the 100,000 threshold which would trigger such discussion. Jacob Rees-Mogg Leader of the House of Commons, has temporarily suspended debates in Westminster Hall, meaning that the possibility of the Stamp Duty holiday extension being debated in parliament unlikely. This could mean that we could be looking at a large amount of property sales falling through.

The idea of the Stamp Duty holiday was to give the housing market a helping hand so that the Government could claim taxes such as Capital Gains on some property transitions. Before Covid-19 you could pay Capital Gains within a year however, now they have passed the legislation it must be paid almost immediately. The Government won’t be gaining more Stamp Duty than they usually would as many buyers will not be able afford the Stamp Duty and will most likely stay in rented or in the property they currently own. The unfortunate realization that will potentially occur is that there will be a large amount property sale falling through and the property value will decrease.

Buyers and sellers aren't the only ones that will be affected, as estate agents, solicitors and other property professionals will feel the hit. This is because many professionals rely on commission of property sales therefore, if property sales fall through then many businesses aren’t receiving the expected income. The Government will also lose out on tax from their income.

Has the stamp duty holiday helped buyers with a small deposit trying to get on the property ladder?

Many buyers with a small deposit, may have missed the boat. As an independent mortgage advisor informed us that 10% mortgage are very hard to get a hold due to the large increase of demand and the majority of the lenders increasing their minimum deposit criteria.


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