Tuesday 7 July 2020 3:33 pm

Stamp duty holiday: What does it mean for the UK housing market?

In a “mini-budget” spring statement tomorrow chancellor Rishi Sunak is expected to announce a range of measures to boost the economy which has been ravaged by the coronavirus crisis. 

As part of the package the chancellor is reportedly planning to cut stamp duty for properties worth up to £500,000 in a bid to reinvigorate the housing market after it was brought to a standstill by the coronavirus lockdown.

Read more: Halifax: UK house prices suffer longest fall since 2010

Data published this morning by Halifax showed that UK house prices fell for the fourth month in a row in June – the first time since 2010. 

Estate agents and property industry groups have been urging the government to grant a stamp duty holiday throughout the coronavirus crisis, in a bid to encourage nervous buyers. 

The Royal Institution of Chartered Surveyors (Rics), Knight Frank and Zoopla were among those in the sector to call for a cut to stamp duty. 

What is a stamp duty holiday?

Stamp duty is a tax paid by property buyers, and the amount paid depends on the area of the UK, the value of the property or land and whether or not you are a first time buyer.

In England and Northern Ireland buyers pay the tax on properties sold for more than £125,000, although first-time buyers only pay stamp duty on deals worth more than £300,000. 

For non-first-time buyers the tax is two per cent up to £250,000, five per cent up to £925,000, 10 per cent up to 1.5m and 12 per cent above £1.5m. 

Sunak is expected to say he will raise the property tax threshold to as high as £500,000, four times its current level. That would exempt most homebuyers from paying any stamp duty for up to a year, the Times reported.

Who would benefit from the changes?

Experts said that buyers with big deposits that are looking to purchase a home in a more expensive area will benefit the most from the tax cut. First-time buyers could benefit depending on where they are looking to buy a house. 

Legal & General Mortgage Club director Kevin Roberts said: “The latest stamp duty holiday proposals look to be another step in the right direction and make for positive reading for first-time buyers. 

“Our new research suggests that first-time buyers could be the engine that drives the housing market forward this year, with 93 per cent still planning to purchase a property in 2020. 

“A stamp duty holiday would bring more savings to these people planning to step onto the ladder. Our research revealed that many prospective homeowners have already been managing to save extra during the lockdown – an average of £107 a week in fact.”

Read more: Rishi Sunak’s summer statement: What can we expect?

However, Rightmove property expert Miles Shipside said that a stamp duty holiday would not benefit most first-time buyers without better mortgage availability. 

Rightmove’s Property Expert Miles Shipside said: “Buyers in higher priced areas with bigger deposits would benefit most if the stamp duty threshold was raised to £500,000. 

“If it is included in the summer update it needs to be made clear what it would mean for people home hunting or currently going through the conveyancing process right now, as an announcement now that doesn’t come into play until the autumn will only lead to people delaying their plans.”

“There have been similar packages in the past which were focused on people buying their first home, but the suggestions are that this new proposal will be for all buyers,” Yorkshire Building Society’s strategic economist Nitesh Patel added.

“This will benefit homeowners looking to upsize and downsize, as well as first-time buyers in high-value areas.”

What would a stamp duty holiday mean for the UK housing market?

Property experts anticipate that tomorrow’s announcement could boost housing activity, although they warned that changes must be implemented straight away to avoid buyers holding out until autumn.

Yorkshire Building Society’s strategic economic Nitesh Patel said: “We have yet to see the full details of a stamp duty holiday package, but if the speculation is correct then buyers purchasing a property of up £500,000  from the Budget announcement in the Autumn stand to save between £10,000 and £15,000 – which is a substantial amount and should boost housing activity. 

“But, it would be even better if the changes came into force straight away rather than waiting until the Autumn.”

Read more: Coronavirus: Knight Frank and Rightmove call for stamp duty holiday to reignite market

Patel added: “ Mortgage rates are near to record-lows, which is also likely to help the housing market over the coming months, particularly for those buying more expensive properties. I would also expect more homes to come on to the market, particularly around this price bracket, as the stamp duty cut would improve the saleability of their home.”

Bricks & Logic founder Matthew McDwyer added: “We may not see an immediate spike in asking prices to the level we saw in 2015, but it will definitely support the market and we will perhaps see slight price increases for the cheaper to middle range of the market.”

“However, any reduction in stamp duty on second homes or investment properties could spike new demand from overseas investors or landlords,” McDwyer said. 

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