With research showing that up to 325,000 homebuyers who agree to purchase a property before the end of the year are expected to miss out on the stamp duty holiday, costing the economy billions in lost revenue, a leading tax expert is calling for the current deadline of 31 March to reviewed by the government as a matter of urgency.
A significant increase in property sales since the introduction of the temporary cut in stamp duty during lockdown have led to conveyancing, surveying, mortgage and search services being overwhelmed.
According to the property market analysts Twentyci, the average time it is taking from agreeing a sale to completion is five months, meaning that sales agreed now may not go through before the tax break comes to an end on 31 March.
Twentyci also calculated that if one in five buyers decides to pull out of their purchase because they will not complete before the deadline, the percentage of sales falling apart will rise from 23% – 53% by March, when taking into account the subsequent impact on purchase chains. The loss of 325,000 sales would cost the economy in the region of £4bn.
David Hannah, founder and principal consultant of Cornerstone Tax, said: “It is critical that the government reviews this stamp duty holiday, and either announces an extension or amends the tax payment date so that homebuyers can still take advantage of the holiday even if they cannot complete by 31st March next year.
“The most preferable option would be a phasing out of the holiday, to avoid those who are currently in the process of purchasing their properties, essentially being thrown off a cliff-edge.
“Throughout other economic crises, stamp duty changes or relief have historically done very little to get the market moving again and there is no reason why it would help this time around either. It has been and still is a poor tool for managing market behaviour. With low-deposit mortgages almost disappearing altogether, people are having to assess their options.
“The government needs to do more to help get people get on the property ladder – government-backed purchase mortgage guarantees for borrowers would be a great way to reinstall confidence in the lending market. If the term of these guarantees were for five years, for example, the inflation of the housing market during the medium term would wipe off any negative equity on those properties. This would give the market some security again, help buyers, and get the market moving again.”
If England and Wales had adopted a Scottish style missive whereby if missives are concluded and binding on a certain date well ahead of an agreed fixed date of entry then the rush to conclude missives with a date of entry on or ahead of 31st March would be better managed. As it is, because clients in England and Wales have to endure the dreaded ‘chain’ where contracts are not exchanged until a week or so ahead of completion, no wonder these is confusion, uncertainty and carnage- Now is the time for change with the existing system creaking and being shown to be inadequate.
Stop blaming the government and take control yourselves of an antiquated, consumer unfriendly system-come and join the rest of us in the 21st century where the consumer is king!
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March is a long way away and anything could happen between now and then. Gov could extend the stamp duty holiday at the eleventh hour dependent on how steep the rise in completions is during March, and how bloated pipelines are before the deadline. Bleating about it now isn’t the right answer.
By Spring, the U.K. might be ready for a new financial boost and extending the tax break might be a useful part of a stimulus package. This, to coincide with a Boris-boost, possibly with Gov-backed deposits for first timers, could be answer to removing the “cliff edge” at the end of March.
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£4bn against at total nominal UK GDP of £2.18 trillion(2019). £4bn of cash lost back in the economy from 325,000 transactions (Ave £12307 per sale) = keep the NHS funded for just over 10 days. Total estate agency market was worth £12bn in 2019; with 161,000 employed Full service Restaurant Business was worth £23bn in 2019; with 564,000 employed Think Mr Sunak has bigger fish to fry so to speak~
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Many a mickle makes a muckle.
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