House prices are expected to hit record highs this year after Chancellor’s extension of current stamp duty holiday
House prices are expected to hit record highs this year after the Chancellor announced an extension of the current stamp duty holiday.
The holiday will save thousands more buyers up to £15,000 in costs.
However, experts warn it will help push home ownership even further out of the reach of many wannabe first-time buyers.
Stamp duty holiday: House prices are expected to hit record highs this year
WHAT EXACTLY DID THE CHANCELLOR ANNOUNCE?
Rishi Sunak has said the stamp duty holiday will be extended until the end of June. That means homebuyers in England and Northern Ireland will pay no stamp duty on properties worth up to £500,000.
The extension will save an additional 300,000 home buyers up to £15,000, according to property website Rightmove.
The holiday was introduced in July last year to help bolster the housing market through the pandemic and had been due to end this month.
An extension to the deadline was widely expected. But in a surprise move, the Chancellor also announced that stamp duty will be tapered after the holiday ends. The threshold will drop to £250,000 until the end of September before returning to its normal level of £125,000.
IS IT GOOD NEWS FOR HOUSE BUYERS?
Thousands of homebuyers will have breathed a huge sigh of relief. Buying a home is stressful at the best of times, but in recent months the usual strains have been magnified.
The stamp duty holiday created a frenzy of activity, with thousands more homebuyers than usual competing for conveyancers, surveyors and property checks.
Benefit: First-time buyer Jessica Sena saved £5,000 from the holiday
The pandemic has added further strain, with social distancing rules making viewings more complicated and illness creating delays.
Without an extension, thousands of deals would have likely fallen through because buyers could not get a purchase over the line in time.
Brian Murphy, head of lending at Mortgage Advice Bureau, says: ‘Home buyers currently in the process of completing their property transactions can now breathe easy. The extension offers some much needed latitude to the industry as conveyancers have been overwhelmed by the sheer volume of transactions – and should help ease the current bottleneck.’
The taper will also avert a cliff edge, softening the blow for buyers who don’t complete by the end of June.
HOW WILL THEMOVE AFFECT HOUSE PRICES?
The current stamp duty holiday has already helped push up house prices to a record high.
Prices rose by 8.5 per cent last year to £252,000 on average, the highest annual growth rate since October 2014, according to the Office for National Statistics. An extension is likely to push them higher still. House prices could rise by five per cent this year, the Office for Budget Responsibility predicts. That marks a huge turnaround from its November forecast of a 3.5 per cent fall.
CAN NEW HOMEBUYERS MEET THE DEADLINE?
In theory, yes. The time it takes to sell a property has plunged in recent months. The average number of days it takes fell to 49 in November compared with 67 a year earlier, according to Rightmove. But obstacles can delay the process.
Fran King, 26, has been waiting over a month for checks to come back on the home she is buying with her boyfriend in Langdon Hills, Essex.
‘The stamp duty extension is such a relief,’ she says. ‘We were glued to Twitter during the Budget, hoping one would be announced. The market is really crowded so everything is a lot slower.’
Paul Stockwell, chief commercial officer at Gatehouse Bank, believes the extension is likely to entice even more people into the market. He warns: ‘Anyone about to embark on a home purchase above £250,000 should budget to pay stamp duty.’
WILL FIRST-TIME BUYERS BENEFIT?
First-time buyers already benefit from stamp duty relief. Since November 2017 they have not paid any stamp duty on properties costing £300,000 or less.
But Jessica Sena, 26, believes the stamp duty holiday is beneficial for many first-time buyers like herself. Jessica and her partner exchanged contracts on a property purchase in Essex just hours after the Chancellor’s announcement.
She says: ‘For anyone buying anywhere near London, £300,000 will not get you very much. The current stamp duty holiday will save us £5,000. When you’re buying your first home, every penny counts.’
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