Stamp Duty Land Tax – too late to the party?

While those who are at an advanced stage in the buying process are looking forward to a saving on Stamp Duty Land Tax it is generally acknowledged that time is running out for new transactions to complete in time to take advantage of the Chancellor’s concession.

The Stamp Duty Land Tax holiday is due to end on 31^st March 2021 and while a petition to extend it has topped 100,000 signatures it would be reckless to depend on an extension; so those entering the market now would be wise to assume they will have to pay Stamp Duty Land Tax.  I propose that for those new purchasers it is not in their best interest to try to get in under the wire.

Here’s why

1. Demand for property has increased so fast since the Chancellor’s announcement that it has become a seller’s market with house price inflation well above the normal range.  As in any shortage, particularly desirable properties have increased in price even faster.
2. The maximum savings under the current scheme is £15,000 and this applies to properties priced in excess of £500,000.  According to Nationwide Building Society the average house sale price in England and Wales in December 2020 was £230,920 which equates to £2,118 in SDLT or less than 1% of the purchased price.  It follows that if the race to buy property in the current market results in an increase in price of more than 1% that buyer has lost money.  Similarly, a price increase of more than £15,000 on any property will be a net loss to the buyer even if they get the full SDLT discount.  Right Move has detected a reduction in prices in the month to 9^th January 2021 which it attributes to a realisation that it may not be possible to complete before 31^st March 2021. If sustained it will not take long to overreach any possible SDLT holiday savings.
3. Additionally, the increase in volume generated by the SDLT holiday has created a number of capability gaps.  Solicitors are fully committed, Surveyors the same; banks and local authorities are struggling with the reduced capacity due to the pandemic forcing home working as well as an increase in the number of applications.  This slows down the process, increases stress and makes buyers less discerning and more likely to accept sub optimal deals in the race to meet the 31^st March deadline.  For the vast majority of people a property is somewhere they live and the idea coming home every night and coming face to face with a poor decision made under pressure is less than ideal.
4. If as some predict the market slows down in the spring as the result of a combination of the pandemic, economic downturn and the ending of the SDLT holiday then there will be more choice and more bargains at a time when the capacity of the property industry is to service buyers is increasing.  That is a buyer’s market and if you are the hunt for a property that is where you want to be.

For most people buying property is the largest single financial transaction they will ever undertake, it pays to consider all the issues and to get the right balance before committing.