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On the 8th July 2020 the Chancellor, Rishi Sunak, announced an increase for the zero threshold on the payment of stamp duty in England and Northern Ireland in an attempt to help kick start the flagging housing economy post-lockdown. But did it work and will it last?
The payment of stamp duty threshold was raised from £125,000 to £500,000 on all properties in England and Northern Ireland; meaning that no duty will be payable up to this amount. Above this level tax will be at a graduated rate starting at 5%, rising to 10% between £925,001 and £1.5million, and 12% above £1,500,000. Second home purchasers will also see some benefit, with a reduced stamp duty of 3% on second home purchases up to £500,000. The ‘holiday’ will last until March 2021 and could save house buyers up to £15,000 on a purchase price of £500,000.
It certainly seems to have had the desired effect as house sales have rocketed and property values increased following the Chancellor’s announcement. With summer a traditionally slow time in the housing market when people focus on their own holidays, it would seem that this year only the stamp duty is on holiday and everyone else is staying put and moving house.
According to the property platform, Rightmove, they have seen the busiest month for agreed sales in the last ten years, up 60% on 2019, as well as the highest number of properties coming to the market since March 2008. This is across all sectors and prices and Miles Shipside, Rightmove director and housing market analyst comments, “Rather than just a release of existing pent-up demand due to the suspension of the housing market during lockdown, there’s an added layer of additional demand due to people’s changed housing priorities after the experience of lockdown….. The out-of-city exodus has helped push prices to record levels in Devon and Cornwall, for example, where working from home means a different lifestyle much closer to your new doorstep.”
Whilst everything is riding high at the moment, the thinking is that the stamp duty cut will not be enough to keep the market buoyant, once the furlough scheme and mortgage holiday periods come to an end. Overall, analysts think there will be a fall in property prices towards the end of the year; bottoming out early next year at around 8.2%, according to the Office for Budget Responsibility.
Additionally, mortgage lenders are increasingly cautious about lending, making it more difficult for those who have been furloughed or those in what are deemed high risk sectors, such as the hospitality industry, to secure funding.
In summary, it seems that in the short term the stamp duty holiday certainly seems to be increasing demand in the housing market, but the long term future remains less certain.
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