Housebuilders aren’t happy though and some are calling for the tax to be abolished altogether.
A new Stamp Duty extension has been agreed upon, following requests from hundreds of homeowners and housebuilders who had concerns about previous Coronavirus lockdowns impacting the ability to complete before the deadline ends.
The new extension until September 2020 is welcomed by current buyers in the process of completing their purchases but others including housebuilders and the CPS are calling for a further extension or a permanent threshold increase of £500,000 for primary residences.
How long is the Stamp Duty extension?
Chancellor Rishi Sunak has announced his annual budget which confirms that the Stamp Duty threshold deadline will be moved from the 31st March to the end of September 2021
The Times had previously reported that the chancellor would use his budget on the 3rd of March to make the announcement which could help to keep the property market in good health as it recovers from the economic impact of Covid-19.
When the extension is set to end, many UK buyers will be faced with paying the tax which is charged as a percentage of the property’s value.
However, in a bid to taper the support, the Stamp Duty nil-rate band will be gradually reduced from June 2021. It’s hoped that in doing so, the housing market can avoid a cliff-edge effect caused by a sudden decrease in demand for property.
Why was the Stamp Duty threshold initially increased?
To protect the housing industry throughout the pandemic and instil confidence and more buying power, the Stamp Duty threshold was temporarily raised from £125,000 to £500,000 for property sales in England and Northern Ireland.
In Scotland and Wales, it was increased to £250,000.
The UK government hoped that this would stimulate growth in the property sector,
a vital industry for the economy given that it provides countless jobs throughout the UK.
This difference in cost for those who can meet the deadline has resulted in many buyers being able to buy more valuable property, which in turn is good for housebuilders and the housing market in general.
Has the Stamp Duty cut been helpful for the housing sector?
After an initial sharp decline in property sales between April-June 2020, by the end of 2020, the number of property transactions swiftly increased to the highest level since before the global financial crisis in 2007/8.
This growth provided confidence to housebuilders who in-turn could build and plan to build more houses to meet demand.
The CPS report that the Stamp Duty holiday has helped hundreds of thousands of homeowners
87% of people buying a primary home escaped the tax thanks to the holiday, a figure which rises to 93% outside of London and the South East
The number of property transactions increased from 132,090 in the second quarter to 225,870 in the third quarter and 316,300 by the end of quarter four
It has also warded off a collapse of the housebuilding sector, with more new builds completed in Q3 2020 than in the same period in 2019
CPS research found that between Q2 and Q3, the number of new builds started rose by 134% from 17,580 to 39,880.
The number of new builds completed rose by an even more impressive 164%, from 16,310 to 43,070.
Why is the Stamp Duty threshold being extended now?
The numerous lockdowns experienced in the UK have caused a significant delay for many businesses within the property sector which affects the speed at which buyers can process their purchases.
The new extension will give 6 additional months to current buyers, who can use this time to complete their property purchases and avoid paying the Stamp Duty, saving a potentially eye-watering £15,000 for some buyers.
House sales have gone up but is that about to come to an end?
Property experts have concerns that once the Stamp Duty holiday comes to an end, the property market will see a slump, causing a negative knock-on effect for the rest of the housing sector, including surveyors, conveyancers and housebuilders.
Demand for UK property is high in Q1 of 2021, arguably because of a swarm of buyers hoping to meet the Stamp Duty and Help to Buy deadline extensions but perhaps even more so because of increased demand to move nearer to open, green space after various lockdowns of 2020- 2021.
Coronavirus restrictions are set to end on June 21st and as free movement becomes possible and the extension deadline dates pass, demand for property could decline.
In fact, some experts predict that many would-be buyers will wait to see the impact of the Stamp Duty holiday ending, in the hope of a summer slump that causes property prices to fall.
Government announces 5% deposit mortgages in a bid to boost housing market
However, that could be set to change with the announcement of 5% deposit mortgages making a come-back. On the 3rd of March, 2021, Rishi Sunak provided details of his plans to “end generation rent” through government-backed 95% mortgages.
The news could help to maintain and possibly increase demand for property, helping to outweigh any negative effects caused by the tapering and finally the end of the Stamp Duty extension.
Will the new Stamp Duty extension help new buyers?
The time it takes to have surveys completed, find a mortgage lender and then compete, will likely be longer than the additional time that the extension allows for, though that’s not necessarily the case for every situation.
If you’re currently in the process of buying a property, meeting the new Stamp Duty extension deadline may be more realistic whereas a completely new mortgage applicant who is yet to begin the process, may struggle to hit the date.
Speak to one of our mortgage experts for advice tailored to your situation either via our online chat or on the phone.
Will the government abolish Stamp Duty land tax in the UK?
The self-proclaimed “think tank” CPS are calling on the government to permanently increase the threshold on primary residences to £500,000 or abolish Stamp Duty Land Tax completely.
The Times reported that it would cost the treasury £1bn to cover the costs of the Stamp Duty threshold extension but CPS has proposed a reform to the rates alongside the threshold, estimated at £3 billion.
They suggest that once the wider economic benefits are accounted for, a Stamp Duty abolishment would actually cost just £500 million.
Other benefits would include boosting new build construction by at least 20,000 homes per year which could help homeowners, and the economy, adjust to the changes brought about by the pandemic.
Has Help to buy been extended too?
Yes, New Homes England has also announced a 3-month extension allowing buyers currently in the process of buying a new build home with Help to Buy, more time to complete and therefore be eligible for the benefits of the current scheme.
You can read more about the Help to Buy extension in our guide or alternatively, ask one of our mortgage experts for their advice via our online chat or over the phone.
Buying property after the Stamp Duty holiday ends
Whether you’re buying your first home, upgrading to a larger property, downsizing or buying a buy-to-let property, 2021 could still be a great year to lock in low-interest rates and with the help of a mortgage broker, you could still make an advantageous property purchase with an affordable mortgage.
Our experts search for the best mortgage deals and compare the other, frequently forgotten about factors, that can also affect how much your mortgage costs overall and whether a deal is truly the best for you.
They’ll check the costs of arrangement fees, early exit fees and mortgage insurance while also considering incentives like cash-back or free solicitor’s fees, to narrow your options down and present you with a list of relevant options.
Call 023 8098 0304 or send us your details or questions via our enquiry form. It’s free, fast and could be the start of your experience as a buyer in 2021.