It’s fair to say that the property market has exceeded most expectations in terms of the volume of activity during the course of the pandemic. There have been a number of contributing factors to this. The pent up demand from people living in lockdown created an initial rush to the market. This rush increased further when the government announced the Stamp Duty Land Tax holiday. And with the end of the holiday looming, the Chancellor has finally answered the big questions in his spring Budget.
There were a number of reports speculating that the government was proposing a three month extension to the stamp duty holiday and this was announced today (3 March 2021), to be followed by a tapering of it to pre-COVID levels.
The steps the government is taking
Stamp Duty Land Tax holiday extended to the end of June 2021
The government has announced a further extension of the holiday to 30 June 2021, leaving the ‘holiday’ running in its current format. Although the stamp duty holiday has definitely increased the activity in the market, it has also increased the levels of pressure on the industry. This extension now takes the pressure off the huge volumes of transactions that were pushing to complete before the end of March 2021. However, without further measures, the government is just moving the deadline to the end of June. This could leave clients in the same position come May/June and may not be a satisfactory outcome for a number of people.
Reduced rate of Stamp Duty Land Tax from July 2021
From 1 July 2021, the government is to taper the end of the stamp duty holiday. At present, no stamp duty is payable on a purchase up to £500,000 (unless the property qualifies for the second home stamp duty surcharge). The proposal is to taper the holiday down from the current level of £500,000 to £250,000 until 30 September 2021.
From 1 October 2021 it will return to the normal levels of stamp duty (payable on properties over £125,000) before the pandemic.
This is a much more controlled end to the stamp duty holiday and may relieve some of the pressure on the industry.
Mortgage guarantee scheme
The Chancellor has also announced a new low-deposit mortgage guarantee scheme to bring back low deposit mortgages that have virtually disappeared over the past 12 months.
The new government-backed 95 per cent mortgages will enable more people to get on the property ladder, who have been excluded until now due to not having a large enough deposit. Unlike the Help to Buy Scheme, this mortgage guarantee scheme will not be limited to first time buyers or restricted to new build properties.
With the addition of this scheme, and the combination of an extension and a tapered return to normal regarding stamp duty, it will certainly relieve the pressure on the industry and will provide certainty for future buyers who now have the information and time to make their proposed moves. One thing we don’t expect though, is for the market to calm down any time soon.
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