Rumours that Chancellor Rishi Sunak is set to announce a stamp duty holiday in tomorrow’s mini-budget have set the property industry buzzing.
The news that he is planning to lift the threshold for paying the tax from £125,000 to £500,000 for a limited period has been largely welcomed as a great way to kick-start the market.
At least one expert, though, says the money would have been better targeted at first-time buyers – while others fear the planned autumn start date will freeze transactions already in the pipeline, with buyers unwilling to lose out on a sizeable amount of cash.
Boost for consumer spending
Richard Donnell, Research & Insight Director at Zoopla, commented: “Stamp duty holidays are a tried and trusted way to support housing market activity and provide an additional incentive to move home at times when the economy has been hit.
“Temporarily removing stamp duty for homes up to £500,000 for six months will cost the Treasury £1.3bn but it will ensure almost nine in ten sales will be free of the tax, compared to just 16% now.
“Housing activity has already rebounded strongly since the market reopened and any major change to stamp duty would provide a further boost to demand for housing. The government would hope that the savings feeds into additional spending in the real economy with more cash spent on home improvements and white goods rather than enabling buyers to spend that bit more on their next home.”
Dominic Agace, chief executive of Winkworth estate agents said stamp duty exemption or reductions “would provide a real impetus to hundreds of thousands of people” who have stayed put because the costs of moving have become so high.
“Since the lockdown, many people have re-evaluated their lives and want to move, particularly those whose employers are offering flexible working from home as a permanent feature. The current levels of stamp duty affect all home buyers, from first-time buyers to downsizers.”
But he added: “We would like to see changes made as soon as possible to have a real impact on the market this year.”
‘Must happen immediately’
Tom Bill, head of UK Residential Research at Knight Frank, said, also warned the relief would need to be introduced immediately, “to prevent buyers from putting plans on hold and losing the momentum that has built since the market re-opened”.
He added: “The government understands that moving house has far-reaching benefits for the UK economy and this may form part of a wider re-think of property taxation that recognises this strategically important role.”
Franz Doerr, founder and CEO of flatfair, agreed that plans for a stamp duty holiday were welcome, but also cautioned that cuts to rates cannot wait until the autumn. “The entire market will be paralysed by prospective buyers waiting for their discount,” he said.
“The industry also needs clarity on what this will mean for buy-to-let landlords. Thousands of landlords have left the sector in recent years, and support to help increase the number of homes available for rent is sorely needed.”
‘Needs to target first-time buyers’
Meanwhile Anthony Codling, CEO at property portal Twindig, said a blanket cut in stamp duty would not do enough to help first-time buyers, and called for a more targeted approach.
He pointed out that first-time buyers already do not pay any stamp duty on homes costing up to £300,000, with a reduced rate up to £500,000, and that 64% of house purchases in England between October and December 2019 were for less than £300,000.
“The most helpful tool used since the credit crunch to get the housing market moving has been Help to Buy,” he said. “Help to Buy kick-started the new-build housing market which was great because we need more homes. However, it only applies to the new-build market.
“If the UK government wants to ‘do whatever it takes’, why not open up Help to Buy to the whole market? In a normal housing market new build only accounts for around 10% of housing transactions, why not help the missing 90%?”