With the phased end of the government’s stamp duty holiday almost upon us; property buyers who have not yet completed their purchases face a frantic rush to do so by the end of today.
Jamie Bartholomew, Director of The Residential Mortgage Hub
It is feared that buyers who have already borrowed up to their maximum limit, but who miss the deadline, will not have the extra funds needed to pay their resulting tax bill and will be forced to pull out; potentially putting a chain of sales at risk.
Those that fail to complete, risk having to pay up to £15,000 extra to secure their property! Speaking with Jamie Bartholomew, Director of The Residential Mortgage Hub he states that “the scramble to save property buyers hard earned cash has, unsurprisingly, injected pure rocket fuel into the market. The stamp duty holiday has been the overwhelming driver of the property market since it was announced by Rishi Sunak last July.”
What is the Stamp Duty Holiday?
In an effort to restart the housing market at the end of the first lockdown, the tax break meant that anyone who purchases a property that completes by June 30, 2021 won’t be taxed on the first £500,000. The government’s plans to extend the tax break for three months were announced by Mr Sunak back in March 2021; providing extra time for homebuyers to complete their sales. The nil rate band will move to £250,000 – double its standard level – until the end of September. The usual level of £125,000 will return on October 1.
What does this mean for potential property buyers?
The government says that if you purchased a residential property between July 2020 to June 30 2021, you only start to pay Stamp Duty Land Tax (SDLT) on the amount that you paid for the property above £500,000.
These rates applied whether you are buying your first home or have owned property before.
If you purchase a residential property between July 1 2021 to September 30 2021; you only start to pay SDLT on the amount that you pay for the property above £250,000. For example, if you bought a house for £600,000, you would pay nothing on the first £250,000; and then 5 per cent on the remaining £350,000.
From July 1 2021, the special rules and rates for first time buyers apply, including first time buyers purchasing property through a shared ownership scheme.
What about first time property buyers?
First time buyers were already exempt from paying stamp duty for the first £300,000 of the purchase price. So most home buyers will be unaffected unless they buy a property over £500,000.
What about second homes or buy to let properties?
People buying second homes, or buy to let properties still have to pay the 3% extra duty for second homes on the full purchase price. This applies until September 30.
Recent property market data
Last week, the latest property data was published by HMRC. It showed that housing transactions in May 2021 were almost 140% higher than in the corresponding month last year. Although it is worth noting that the country was under lockdown in that period. The total HMRC tax receipts in the last 12 months exceed pre-pandemic receipts for the same period in 2019.
Jamie Bartholomew, said: “Not only have the country’s tax receipts returned to expected levels; there have also been more than half a million residential property transactions in the last four months to 31 May 2021. In fact the total for the last 12 months is 1.3m residential property transactions. This is 22.7% up on the 12 months to 31 May 2020.”
We expect that June’s results will push this figure even higher; as the last of the transactions squeeze in before the deadline.
Our predictions for the future of the property market
Clearly the Stamp Duty Land Tax (SDLT) holiday, a year of being trapped in the same four walls, and a new vision of the future of work arrangements has changed homeowners perspectives; meaning that the need for space and a home office took higher priority that it did so before. As well as not necessarily needing to being in such close proximity to your employer, had a huge impact on the property market.
Overall, the stamp duty holiday spectacularly did its job to get the market moving after the first lockdown but can now been seen as causing more problems than it solves. The deadline has created an artificial bottleneck that is now preventing other transactions from going through. This is down to conveyancers as they have been swamped by people trying to hit this deadline.
The property market is as strong as ever however many predictions suggest that after the stamp duty deadline has passed; we’ll likely see more of a soft landing and slowed activity levels. We may also see more of a culture of ‘improve rather than move’. As the economy recovers, those who were able to save during the pandemic may consider finally getting round to do home renovations.
For more information about how this might impact you please contact us today on 01634 968111 to talk to one of our mortgage experts!
