The stamp duty holiday brought in by the Chancellor Rishi Sunak in July 2020, is coming to end so will this mean a change to house prices or demand for properties? We have enjoyed a robust period in the housing market which nobody wants to end. There are however many reasons to still feel positive about the picture going forward.
How much effect does stamp duty have on property prices?
The prediction or “project fear'' around the end of the stamp duty holiday is that it may cause a levelling off in demand and the market could fall off the cliff edge. This is largely because the initiation of the holiday did seem to coincide with a boost in sales. But was that entirely down to the stamp duty holiday? It seems highly unlikely that this is the one determining factor in the market and that the stamp duty holiday alone is not the reason so many people are moving. Initially there were predictions of a drop in prices after the first end date in March but April actually showed an increase in price. What is being suggested is that instead we are more likely to see a return to more normal timescales for transactions and completions.
The fact of the matter is that stamp duty holiday is not just going to revert straight back to 2020 levels as there will be a tapering off period. The idea behind the tapering off is to prevent a negative impact on the market and to give time for transactions to go through. From the 1st of July to the 30th of September 2021 instead of the threshold of £500,000, the nil rate band will reduce to £250,000. On the 1st of October it will then return to the standard amount of £125,000 as it was back in 2020.
Continuing effect of covid
There is no getting away from the C word and covid is still continuing to affect life including the changes in people's working circumstances and lifestyle. These changes in how people live and work are far more likely to keep the market strong and prices up. This is backed up by the fact that in February we did not see a huge drop in properties on the market. When you add in a largely successful roadmap out of lockdown and lessening of restrictions albeit currently halted temporarily, there are many reasons to be confident in the British economy.
All good things come to an end
While some feel that the stamp duty holiday has given a much-needed boost to the economy and the housing market, others argue we are just delaying the inevitable and oppose the extension. There is no question that stamp duty revenue does bring much needed funds into the Treasury and it is certainly in need of that following the huge coronavirus bill. In terms of the housing market however there is a strong case to continue to feel optimistic about house prices for 2021.
But we have to remember that the property market has a very local and unique “personality” and that is why if you are looking to sell your property you need to talk to a local reputable and experienced agent who can give you a real feel for what is happening locally.