Budget 2021: Stamp duty holiday extension will lead to ‘pandemonium and chaos’ in housing market
Chancellor Rishi Sunak’s decision to extend the stamp duty holiday will lead to “pandemonium throughout the summer months” and “chaos” when the tax break tapers off, says Mark Peck, a director at Cheffins.
Stamp duty was suspended on the first £500,000 of all property sales in England since July 2020 and the holiday was due to end on March 31 - but it will now continue until June 30 after today’s Budget announcement. After that date, the starting rate of stamp duty will be £250,000 until September 30, after which it will then return £125,000, the level before the holiday was introduced.
Mr Peck said: “While the extension to the stamp duty holiday will be welcomed for those with property sales already agreed, the government is simply kicking the can down the road with chaos set to ensue once the tax break is reduced in June and tapered until September.
“The pressure on the property industry since the announcement of the stamp duty holiday has been immeasurable and this extension will simply continue to add to the strain already being felt by both buyers and sellers as they look to complete on sales before the end of the tax break.
“While the Chancellor has attempted to manage this with the tapering system until September, the property industry will need to brace itself for further pandemonium throughout the summer months.
“While the stamp duty holiday certainly allowed the property market to continue with full force throughout the coronavirus pandemic and ensure that property sales continued at a fast pace, it has created an unhealthy scenario with values increasing at unsustainable levels within a short space of time.”
He said the extension of the stamp duty holiday will continue the “bull run” in the property market over the next three months.
He said: “Stamp duty has long been the Treasury’s golden goose and has filled government coffers for centuries, and while the lack of stamp duty paid over the past year will have been felt by the government in terms of income, this extension will ensure that the property industry continues its current bull run over the next three months.
"The property industry has long been a marker for the overall health of the economy and ensuring that transactions continue will encourage more spending on a wider scale, as well as alternative investment decisions as the UK looks to follow its ‘roadmap to recovery’.
“However, the impacts once stamp duty is reintroduced could be major, and these will remain to be seen from September onwards.”
Greg Hill, deputy chief executive of housebuilder Hill Group, welcomed the stamp duty extension and the new “mortgage guarantee” in the Budget. Starting in April, the government will provide a guarantee to lenders who offer mortgages to people with a deposit of just 5 per cent on homes with a value of up to £600,000.
Mr Hill said: “The Chancellor’s Budget clearly demonstrates the government’s commitment to helping people onto the property market and into their own home. The stamp duty extension until the end of June will not only help buyers currently caught in the completion trap, but also give a window of opportunity to additional buyers looking to move.
“The launch of the government-backed 95 per cent LTV mortgage scheme significantly reinforces this commitment by opening up the market to hundreds of thousands more buyers, offering an essential route to home ownership at a critical point in this country’s recovery from the pandemic.”
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