Chancellor Rishi Sunak has confirmed that the Stamp Duty threshold will be increased to £500,000 immediately until March 31 next year.
Sunak confirmed rumours of the Stamp Duty holiday during his summer economic update this afternoon.
He said the Government will temporarily increase the nil-rate band of residential Stamp Duty in England and Northern Ireland from £125,000 to £500,000.
This will apply from today until March 31 2021.
The Treasury said nearly nine out of ten people getting on or moving up the property ladder will pay no Stamp Duty at all.
The aim is to boost the housing market and the wider economy to help the UK recover from the consequences of the coronavirus pandemic.
It comes after the property market was effectively closed between the end of March and mid-May.
Agents and portals have said there has been more demand since the market reopened but it is so far unknown if this will transfer into sales.
Rightmove said there are more than 510,000 properties with asking prices under £500,000 on the portal, making up 81% of all residential stock for sale in England
The property website said 291,000 properties under £500,000 are currently available for sale, making up 78% of all properties listed in England.
It said people enquiring about properties under £500,000 on Rightmove makes up 84% of all buyer enquiries in England.
Mark Hayward, chief executive of NAEA Propertymark, took some of the credit for the changes.
He said: “Following our engagement with the Treasury and Ministry of Housing over the past few months, we welcome the Chancellor’s announcement this afternoon that he will be raising the threshold at which buyers will pay stamp duty to £500,000.
“This a is a welcome commitment by the Government and we are glad that they have listened to our calls to help sustain the property market following lockdown.
“These measures will enable people looking to buy a home to have the confidence and stability to be able to move forward with their purchase, which in turn will have a knock on effect on the wider economy as people buy white goods and furniture.
“The market is moving well at the moment, however once furlough has ceased and the anticipated recession hits, the market might well need further financial impetus, therefore it is right that the sector is given the support and tools it needs to rebound over the next nine months.”
Mark Peck, head of residential at Cheffins estate agency, said this could provide the incentive many unsure buyers and sellers need.
He said: “Whilst the market has already been significantly busy post-lockdown, cutting Stamp Duty on purchases up to £500,000 really will be the catalyst get the industry flying.
“The most likely impact of this measure will be a flood of buyers coming into the market who previously had sat on their hands due to political and economic uncertainty, and this flurry of activity will bring with it price rises as demand outweighs supply.
“However, it will also be a stimulant for those considering selling as people look to make the most of a buoyant market during the tax holiday.
“Whilst the virus certainly will have had a long-lasting effect on the property market, it has also meant that many people’s situations have changed and with diminishing pressure to work five days a week from the office, new working hours and other varying priorities, this stamp duty reduction will provide the additional push for many to take the plunge and get on with house moves.”
He suggested it would also boost those with a low deposit as they could now increase it with the Stamp Duty savings.
However, Miles Robinson, head of mortgages at online mortgage broker Trussle, warned this could create bidding wars that push the price up and some sellers may list at higher prices.
He also suggested this would benefit second steppers more than first-time buyers who already have an exemption up to £300,000.
Charlotte Nixon, mortgage expert at Quilter added that a lack of mortgage deals may make it harder for everyone to benefit.
She said: “Lots of first-time buyers face a significant challenge as many lenders have pulled their 95% and 90% loan to value (LTV) products.
“This means in effect that the goal posts have been moved for these buyers as they now need to find a 15% to 20% deposit for their first home instead of just 10% or 5% prior the pandemic.
“Unfortunately, due to the poor economic sentiment at the moment lenders are being very cautious about affordability.
“Whether the Government could support lenders with government backed products for higher LTV deals and enable more first time buyers to enter the market remains to be seen.”
HMRC guidance shows buyers of a main residence will get a full exemption but those purchasing an additional property would still have to pay 3% on the first £500,000 of a purchase.