The stamp duty holiday extension has led to a substantial rise in demand in property over recent months. With a rise in activity and with property transactions taking longer, there are concerns as to whether professionals in the UK will be able to keep up.
The Stamp Duty Holiday
On 3rd March 2021, Chancellor Rishi Sunak announced the stamp duty holiday would be extended and ever since, the property market has been gaining momentum with demand hitting record levels. In fact, supply has struggled to keep up with the ever growing demand especially in the lower priced market:
- Below the £500,000 threshold where the stamp duty holiday creates the largest saving, the increase in activity was a modest 26%.
- The £500,000 to £1 million price band experienced the largest rise in the number of properties going under offer at 57%. This was 40% for the £1 million to £1.5 million bands, with the above £1.5 million brackets seeing the lowest rise at 10%.
The stamp duty holiday first came into effect in July 2020 and immediately led to a surge in demand and property transactions. This has caused house prices to increase, despite the challenging economic landscape surrounding the COVID-19 pandemic.
Originally set to end on 30th March 2021, the stamp duty holiday is now in place until 30th June for properties up to the value of £500,000. A tapering off period will then come into place from 1st July lasting until 30th September, where the nil-rate band remains up to the value of £250,000. From 1st October, stamp duty costs in the UK will drop back down to the normal rate of £125,000.
Use Our Online Stamp Duty Calculator to calculate what you will pay on your new home. We take into account SDLT holiday deductions
UK house prices started to increase in February this year, despite the imminent end of the stamp duty holiday. This could be partly fuelled by altering housing needs because of the pandemic and some buyers relying on the SDLT savings being extended.
A shift to working from home and less commuting during the pandemic has changed what people require from a property. Many are moving out of big cities to smaller towns or more rural areas and are in search of bigger houses, home offices, gardens and more peaceful surroundings.
The average price of a home rose by 0.7% to £231,068, the highest on record, more than reversing January’s 0.2% drop, according to Nationwide. This took the annual growth rate to 6.9% from 6.4%.
Calculate Stamp Duty Costs in the UK to find out what you will pay on your new home. We take into account SDLT holiday deductions
Property Transaction Speeds
With the property market activity at such busy levels, property transactions are taking a lot longer than usual. The risk of property sales not completing by the extended stamp duty holiday deadline is becoming a likelihood for many.
One survey of 5,000 UK estate agents asked what issues they faced in completing property transactions at the moment. 74% of respondents cited “lack of speed of the transaction” as the biggest problem right now. Lack of control came in second with 40% of respondents.
Other research commissioned by the Department of Business, Energy and Industrial Strategy also showed 57% of sellers and 59% of buyers found the buying and selling process was taking longer than they expected. Unsurprisingly, the most common area identified that could be improved in the homebuying process is the speed of the conveyancing service.
Although the stamp duty extension provided a welcome reprieve to the UK property market, many industry professionals, especially mortgage lenders, conveyancers and surveyors, had been under significant pressure.
With the growth in demand caused by the recent extension, the industry is struggling to keep up again with conveyancing firms in particular feeling the strain. The property sector is facing mounting pressure to progress and complete transactions before the end of the stamp duty holiday.
There is even a new petition calling for the stamp duty holiday to be granted upon exchange of contracts rather than at completion. When contracts are exchanged, the sale becomes legally binding. This would predominantly help those buying new-builds in particular as there have been some housebuilding delays due to the COVID-19 pandemic.
The petition states:
“People are finding themselves becoming trapped in a scenario whereby house prices are much higher, and at the same time they will now miss out on the stamp duty holiday. People are being financially punished from both sides, this from a policy that was designed to do the exact opposite.”
Within 24 hours, the online petition collected over 1,700 signatures. It’s expected to be popular among homebuyers, sellers, conveyancers, lenders and surveyors. If the petition receives more than 10,000 signatures, the government must respond and if it gets more than 100,000 signatures, it will be considered for a debate in parliament.