Voices across the property industry are lobbying the Government to introduce a stamp duty holiday. Estate agents and lobbyists are calling for this measure to help kickstart the housing market, as soon as lockdown restrictions are lifted.
Since the lockdown was announced in March, the property market has come almost to a standstill. The latest Zoopla Cities House Price Index revealed that 373,000 property transactions had been put on pause and housing demand had fallen by 90 per cent since the start of March.
Many estate agents are optimistic that the demand is still there, and the market will bounce back when restrictions are lifted. However, they still believe a stamp duty holiday will be necessary to support this resumption of market activity.
‘It would be naive to think that lifting restrictions is all it would take to get people moving,’ explains Paula Higgins. Paula is chief executive of the Home Owners Alliance, one of the organisations calling for a stamp holiday.
‘The housing market is driven by confidence. That is why we are calling for a 12-month stamp duty holiday. This would incentivise families who can afford to move to get on and do so, giving the housing market and all the related sectors the kick start they need.’
In a recent survey, the Homeowners Alliance revealed that 1 in 4 UK adults are experiencing housing issues as a result of the pandemic. Almost half of those are struggling to pay bills, rent and mortgage. It is these financial difficulties that are casting doubt on whether the housing market will be able to spring back into action on its own.
What is a stamp duty holiday?
Currently, a prospective home buyer has to pay stamp duty on a property worth more than £125,000. The more expensive the property is, the higher the stamp duty. However, first-time buyers purchasing a property costing less than £300,000 don’t pay stamp duty.
The idea behind a stamp duty holiday is that it will lessen the financial burden on potential home buyers. Hopefully, encouraging more prospective buyers. This, in turn, would help restore confidence in the market. These would two factors would work together to get the market moving again.
Would a stamp duty holiday help potential buyers?
A stamp duty holiday is not unprecedented. During the 1992 downturn, a stamp duty holiday helped double the number of homes sales. A 12-month stamp duty holiday was also one of the measures introduced following the 2008 financial crash to boost the property market.
However, stamp duty is a lucrative tax for the Government. In 2018 to 2019 it brought in £8.4 billion in revenue for residential sale. A suspension of the tax could potentially lose the Government billions.
Moreover, advocates of stamp duty have argued that it benefits first-time buyers, by edging out buy-to-let speculators. So if the government was to only introduce a stamp duty holiday, it could potentially backfire on buyers in lower price bands.
However, the majority of estate agents, such as Knight Frank, are calling for a combination of measures alongside the tax holiday, including an extension to help to buy.
‘Despite the fact the Government will forgo a significant amount of stamp duty revenue in 2020, it seems clear there will need to be a stamp duty holiday to actually get the market moving once the lockdown is lifted,’ Liam Bailey, Knight Frank’s global head of research, told Homes and Property.
‘But this move alone will not be enough – there will need to be moves across a wider number of areas including an extension to Help to Buy to support first-time buyers and support activity across all price bands.’
The government has yet to make any mention of introducing these measures, so we will just have to wait and see.