Pressure is mounting on Chancellor Rishi Sunak to extend the Stamp Duty holiday for homebuyers in his 3 March Budget. Anyone caught up in the homebuying process and unlijkely to complete by the end of March will be keeping their fingers firmly crossed for an extension but our view is that there is a fine line to tread between helping homebuyers and overloading the lending and conveyancing sector to the point that an extension achieves very little.
The Stamp Duty holiday has certainly given the housing market the intended boost and kept the market buzzing in the midst of a pandemic – no mean feat when you look at the devastation caused by Covid to other sectors of the economy. And people in a position to buy have been able to make serious savings.
Research published this week by estate agent Coulters Property, reveals that the saving on the average house price in Kensington and Chelsea in London could be as much as an eye-watering £94,605! Obviously this is right at the top of the table but even in less wealthy boroughs such as Brent and Southwark, buyers are looking at savings topping £16,000. No surprise then that buyers have been falling over themselves to complete by the end of March.
All this has pushed up house prices, although the latest figures from the Halifax and Nationwide showed slight falls in January as the SDT window started to close. Increasing values are good news for homeowners – but make it even harder for first time buyers to raise a deposit. Nor should we forget that there are areas around the country where average house prices are below the SDT threshold. So buyers in those areas where household income and property values are lower, have had no opportunity to make the savings that have driven the market elsewhere. Not much levelling up to be seen if you live in Burnley or Blackpool.
The last few months’ frenetic activity has not only put enormous pressure on the conveyancing sector but the pandemic has made lenders wary of quick decisions – and rightly so. Lenders have tightened up their criteria hugely since the financial crisis, which has slowed down the application process, in turn leading to a backlog as more people look for new mortgages.
The flats market presents another challenge, as the rush to take advantage of stamp duty savings is further frustrating the thousands of owners trapped by the requirements of EWS1 forms and the inability of most buildings to raise the money to satisfy lenders on the timescale within which problematic materials may be removed. For leaseholders, any extension would be a welcome relief.
So by all means extend the SDT holiday until we see some post-Covid normality return. Housing generates a chain of additional transactions: moving, new furniture, DIY. This all needs a boost right now. The other view is that keeping it in place for too long would encourage more buyers to enter the market with the promise of savings – potentially leading to disappointment for buyers and another cliff edge further down the line.
There is a delicate balance between promoting a thriving housing market and overwhelming the infrastructure that supports it: local authority searches are taking longer, lawyers are trying to process a heavy workload while they have staff off sick or self-isolating and lenders are understandably taking their time with loan approvals. So we believe a carefully managed, tapered approach to bringing the SDT holiday to an end is preferable. It’s a fine line for any Chancellor to tread.
Author : Maryanne Bowring
(Weekly, fortnightly or monthly)