Calls to extend stamp duty holiday mount as fears of slump grow
The UK’s surging housing market could go into sharp reverse next year if the stamp duty holiday is not extended, risking a damaging slump, the government has been told.
The £3.8bn stamp duty giveaway unveiled in July has been credited with fuelling a mini-boom in the property market, but it is due to finish on 31 March 2021 – the same date that the furlough programme and several financial support schemes are also scheduled to end.
Andrew Wishart, a property economist at the consultancy Capital Economics, said ministers may be forced to extend the holiday “to avoid a damaging downturn”.
Highlighting a raised risk of a housing market “correction” next year, he added: “The end of the holiday in March will insert a cliff edge in demand at the exact moment we expect employment and incomes to be suffering most. If it is not extended, that’s another reason to think the surge in transactions and prices this year will be reversed in 2021.”
The stamp duty holiday means buyers of homes up to a value of £500,000 in England and Northern Ireland pay no stamp duty, with a reduced rate for homes above that. For someone buying a £500,000 property, the saving is worth £15,000. Previously the “nil rate band” for residential property purchases was £125,000.
The warning coincided with government property market data that showed the number of stamp duty transactions in the third quarter was 68% higher than in the previous three months, and the amount of money raised from the tax was 27% higher. HM Revenue & Customs said this reflected the easing of the lockdown measures earlier this year and the introduction of the duty holiday.
There have already been a number of warnings about what may happen when the stamp duty holiday ends, plus calls from various quarters for an extension.
On 30 October, the mortgage lender Nationwide said housing market activity was likely to slow down “perhaps sharply” during the coming months if the labour market weakened, “especially once the stamp duty holiday expires”.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
Meanwhile, in recent days, homebuyers who want to take advantage of the holiday have been urged to act quickly, amid warnings that high demand for mortgages and coronavirus restrictions were creating delays in the process.
Wishart said: “We now think that when the cut expires, transactions will fall almost as low as at the height of the first Covid-19 lockdown. The slump in demand is likely to coincide with a rise in forced sales as the ending of the furlough scheme brings a sharp rise in unemployment.”
Earlier this month, mortgage broker L&C said buying a home could take three months at the best of times, and “if you’re not in the process soon, you can’t be banking on completing by the end of March”.
