In what must surely have been one of the most eagerly-awaited Budget announcements for some time – given the economic challenges of the previous 12 months – Chancellor Rishi Sunak confirmed the extension of the stamp duty holiday in March. Eight weeks, and countless conversations with agents, later we review the impact.
Under the new rules, until the end of June 2021, buyers won’t have to pay any stamp duty on property purchases up to £500,000. Following that, the tax will only be introduced on properties at £250,000 and over. It’s expected that stamp duty will revert to its usual level of £125,000 from October 1.
The move was hailed as good news for buyers, removing what is an additional expense during a time when many people have suffered an impact on incomes because of the Coronavirus pandemic, but critically it was designed to reinvigorate a property market that might otherwise stagnate.
In theory, the announcement should have been greeted as positive news, but at Hatch we have found that the reaction to it is rather more of a mixed one.
If the extended stamp duty holiday drives manageable property sales growth and volume, it’s an obvious win for the market. On the other hand, there is a concern that what is a relatively small window creates something of a bubble; a time-precious opportunity to find suitable properties, achieve an accepted offer and complete with the clock ticking.
There’s recent evidence to suggest that the selling period is being lengthened, not shortened. This article in Homebuilding & Renovating quoted research that stated the average selling time has now been pushed up to 295 days. That, by the way, is an increase of 43 days compared to the period prior to the stamp duty tax break. The cause for the increase is said to be the steep rise in the demand for properties from buyers keen to take advantage of the stamp duty holiday.
Hatch’s Head of Sales, Jeremy Baddiel, explained: “The Chancellor’s decision to extend the stamp duty holiday, while well intended, has met with a mixed reaction from our community of agent and developer partners.
“From our conversations with major players across London and the South East, we are seeing some excitement about high rates of sale, but also concern about supply and demand and whether the compression of activity into this small window will lead to a crash once the offer ends.
“We are working with partners to ensure that their clients are attracted to key developments throughout 2021, riding a wave which everyone in the sector is finding it difficult to predict.”
The early indicators were promising. A report in This is Money noted that ‘agreed house sales’ in March had surged in number as a result of the extension of the stamp duty holiday. Data was shared by the Royal Institution of Chartered Surveyors, which also highlighted that March’s volume of agreed sales was the highest level since August 2020.
However, despite the optimism, there was also a cautionary tone regarding demand for property outstripping supply and how this might impact the market once the window closes; echoing the concern we share here at Hatch. The next few months should prove to be an intense period of activity for all involved in the property market, as agents and buyers try to move quickly to secure moves and sales before stamp duty returns. Beyond that, the longer term is more difficult to predict.