Government ‘thinking’ about changes to SDLT causes instant and significant negative effect on the market

Speculation that The Chancellor of the Exchequer, Rishi Sunak, may be about to announce the lifting of the threshold figure at which buyers start to pay Stamp Duty caused a stir yesterday.

The Times set the hare running by saying that the level could be lifted to as much as £500,000. Soon the story was all over the media.

For many months there have been calls  for SDLT to be suspended, abolished, or altered and the effects of the Covid crisis have added pressure on Sunak to act.

Prime Minister Boris Johnson has said a number of times in the past that he wants to overhaul stamp duty, calling it a “huge problem”.

The Chancellor is due to make a summer statement this Wednesday (8 July) and it is expected that he will announce plans for SDLT that will be implemented in the autumn Budget – which is not due until October.

Property professionals know only too well what can happen when a change in process or taxation is announced but not implemented for weeks or months.

The market either rushes to beat a known deadline (think of the ending of MIRAS or introduction of HIPs) or, it seizes up as buyers or sellers pause their purchasing plans to take advantage of a possible forthcoming beneficial change – such as not having to pay SDLT.

Twitter lit up with comments warning the Chancellor of the likely consequences that could flow if he leaves any gap between announcement and implementation

Buying agent Henry Pryor wrote:

“Either announce that you are changing Stamp Duty or announce that you are not but please don’t announce that you are thinking about whether you might – or the market grinds to a halt as buyers & sellers wait to see.”

Ed Mead, head of Viewber, tweeted:

“Why on earth would you trail this – either do it or don’t do it. Market will now go quiet as people wait. Madness…”

Others said:

“Please implement stamp duty holiday immediately. As a homebuyer I will simply delay the purchase otherwise and so will everyone else. The £15k I save will be spent in the real economy on home improvements etc.”

“Do you have any idea what pre-announcing stamp duty holiday is going to do to the CURRENT housing market which is healthy? Use Rightmove stats not out of date Gov figures. Stamp duty needs to be reduced NOW or an announcement made that you will NOT be acting in Autumn.”

“Treasury/No.10 should stop flying kites. Latest example: announcement of a stamp duty holiday, but not until the autumn, could kill the housing market in the meantime.”

“Why brief it? Chancellor now has only two choices. He MUST either cut stamp duty right away or rule out a cut in the Autumn. To do otherwise could ruin the housing market for months to come.”

“Rishi Sunak, stamp duty holiday was something many of us called for back in April doing it now is a tad late for all those awaiting completion. Announcing that you are going to do it in Autumn just stalls all buyers for 3 months. People in our governments are literally clueless!”

“I’m trying it sell my home and buy a new, bigger one. I will now tell my agent to remove the ad… Announce it or clear this up immediately or stall economy.”

I’m a solicitor and my specialism is conveyancing. We are very busy at the moment and what the government may not realise is in light of this suggestion, lots of chains are now holding off exchanges and completions to “see what will happen” this causes market stagnation.

Sure enough, by late yesterday afternoon there was proof positive of the effect of the speculation.

Mark Montgomery, Chief Strategy Officer at Simplify, told us:

“Across Simplify we’ve already had hundreds of instances where existing clients have told us they will want to slow down or pause their transaction until it is clear what is happening with Stamp Duty.

“While no client who was due to complete today has delayed a completion, we have had a significant number of clients who have specifically asked to delay exchange of contracts until after the announcement.

“We have also seen 30% of new clients expressing concern and suggesting they would delay their transaction so as not to miss out on any stamp duty saving – so the impact is already significant.

“While some clients will continue irrespective of any announcement there will be many where the potential Stamp Duty savings are just too significant to ignore.

“It only needs one client who feels that way to stall a chain and, given the widespread press coverage, it would take a lot now to convince consumers that there isn’t a plan for a Stamp Duty Holiday in the autumn if the reports were accurate but it has been ‘announced’ prematurely.

“The best solution now is undoubtedly for the government to go ahead with the Stamp Duty Holiday immediately or risk a major housing market slowdown, just when things were getting moving again.

Peter Ambrose, of The Partnership, highlighted the concerns of customers:

“We have received a number of calls today from clients asking about the Stamp Duty changes.

“Some of those most concerned had already exchanged contracts, so the uncertainty as to the timing of any potential change is very worrying.

“Obviously we don’t know whether any change will apply to properties that have not exchanged (like the last change) or those that have not yet completed.

“Either way, we remain concerned that if, as is rumoured, any changes do not come into place until later in the year, that this will have a negative impact on the market.”

 

 

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17 Comments

  1. mattfaizey

    How on earth can such apparently educated and considered individuals as those in positions of influence and political authority act with such stupidity?

    The housing market has/had bounced back into life. You just put it into a self induced coma.

    Sunak et al- stop effing tinkering.

    Clear up this daft speculation please ASAP.

    Oh, and try going out to people / entities who actually know the current state of affairs instead of listening to those who wish to bend the ear of government for their own gain.

    Kill stamp duty speculation, and please do so TODAY

     

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  2. LondonRealtor

    The constant tinkering with stamp duty over the years is only for political point scoring I fear. There all always costs associated with any transaction, what I think we all would benefit from (across all markets) is a more fair transparent system including lower tax rates and something similar to closing costs in the States where either party can opt to pay their own, portion of the others or all of the closing costs followed by the ability to write off any and all moving expenses, including the removers on your annual tax return. These stamp duty holidays only confuse the market in the short term, they don’t help maintain long term growth.

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    1. biffabear

      Stamp duty should just return to 1% across the board.

      Before stealth tax Brown come along with his tinkering.

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  3. Rebel

    There is something desperately wrong with the whole political process when we have such blatant idiocy at the heart of Government. Too many in-bred toffs in the Tory party now. Like me, Thatcher, Tebbit & Joseph would be disgusted with these clowns.

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    1. s71

      Nice to see all banging on the door of Sunak, have anyone asked Times how they got their story (as they are the only newspaper running this) or was it someone trying to create news so that his purchase can be stamp duty free!!!

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      1. Rebel

        The Sun & Daily Mail had it as well.

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  4. JamesDB

    As the great Master Yoda once said…. “Do, or do not – there is no try”.

     

    Happy Tuesday folks… Keep smiling

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    1. Property Pundit

      You can’t say ‘Master’ any more, didn’t you see yesterday’s post?!

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      1. JamesDB

        oops…  yeah, sorry I forgot that!

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  5. NewsBoy

    Government has an appalling track record when it comes to interfering in the property market and very rarely gets it right – all the way back to double MIRAS back in August 1988 and we all remember what happened then. There were other underlying issues but it took 10 years before prices returned to the same level, after 7 years of decline and hundreds of thousands of repossessions. This market is in a VERY, VERY delicate state and just ready to go into meltdown. There is a VERY real potential for this market to collapse as it is. The “instant” stamp duty reduction will be desperately needed in the few months but to do it now is all wrong.

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  6. Lance Trendall

    Stamp duty changes need to be done within days of announcement to prevent stalling the market.

    This leaking and thinking is absolute stupidity.

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  7. GPL

     
    Speculation….
     
    These clowns couldn’t run for a Bus! ……yet they are running UK PLC.
     
    I don’t do politics and couldn’t give a t@ss which party is running the country.   What I do care about is having a “Credible” Party able to understand the ebb & flow of our country, economy, take clear/effective decisions…. just the usual stuff associated with Government.
     
    Frankly, this is turning into Boris & Dominic’s Big Top Circus Act …..with the audience forced to watch!  
     
       

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  8. PeeBee

    Of course this is now old news – Sunak having announced the implementation of the amendment.

    So it looks like the ‘glass ceiling’ has been raised a notch or three.

    Next headline –

    Sales of £500001+ homes stalled.

    Ho-hum!

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  9. Alan Murray

    The really scary thing about this is that the Chancellor is supposed to be the financial guru charged with getting this country on its feet again. So it is not enough that he stood in front of the country to announce the furlough scheme and promised to do “whatever it takes” to offer financial support for all workers in this country. Whilst at the same time ignoring five million self employed workers. This genius now seems to think that no harm will be done by announcing now a policy will take effect four months in the future. Has he not even checked his history which will show him the market will stall and when the policy starts he will just create another bubble?

    The most obvious thing to do was to announce in the October budget the policy would take immediate effect. Now even if he says nothing tomorrow there will still be a suspicion he is going to do that and there are bound to be some buyers who will now adopt a wait and see approach.

    Are there no advisors in these government departments who can point out to ministers the errors of their ways? Or are they just not allowed to say anything? Oh yes that is probably another story entirely……..

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  10. Will2

    I think this might be called the Nigel Lawson effect,  Politicians  are too arrogant to learn from past mistakes.

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  11. majortom1

    Extend H2B-building more houses is what will create more jobs and keep house prices stable

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  12. Andrew Stanton Proptech Real Estate Strategist

    In 1988 when I was an agent, a certain Nigel Lawson announced the ending of dual mortgage income relief at source, with a long stop date.

    We went from selling 6 properties a week to 10, until the stock ran dry, prices spiked 32%, then for three years following a nuclear winter and prices crashed.

    At present a possible sdlt change will in its own way … cause ripples in the market – those about to change title on a property will sit and wait, and if there is a big change we will see a re-run of 1988 if it is time specific.

    Maybe, Mr Sunak needs to take a look back into history, even the last sdlt change caused a surge in the market followed by a lull, as the market caught its breath.

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