Government not planning stamp duty holiday extension
The government has indicated the holiday will end in March, putting further pressure on the conveyancing system.
2 minutes to read
The government has ruled out extending the stamp duty holiday it introduced in July as one of its pandemic support measures.
In response to an online petition calling for it to be extended or tapered, the government said it “does not plan to extend the relief” beyond 31 March next year.
The news will put further pressure on a conveyancing system that has struggled to process a large volume of transactions since the UK property market re-opened in May. Sales must complete by the end of March to qualify for the saving, which has a maximum level of £15,000.
“This is in response to the petition with the caveat that the government constantly reviews all matters of revenue.” said Mark Hayward, the chief executive of NAEA Propertymark, a professional body representing estate agents that has been consulting with the government. “All stakeholders continue to lobby for an extension”
While the government needs to recoup the costs of the pandemic, the rationale for the holiday was built on the wider economic benefits of moving house. Together with the Home Builders Federation, Knight Frank has calculated that for every 100,000 housing transactions, there is a net positive impact of just below £1 billion for the economy. In addition, more than 11,500 jobs are supported either directly or indirectly by these transactions.
However, the government’s response to the petition was limited to stating that the holiday was intended “to provide an immediate stimulus to the property market.”
Banks have also lobbied the government about their concerns over lost transactions.
“The conveyancing system has been struggling massively and that will intensify as a number of people will be trying everything possible to get deals over the line before the end of March,” said Luke Ellwood, head of south-west London sales at Knight Frank. “What I hope this shows the government is the need for measures to speed up the sales process in future.”
An analysis of deals underway this year showed that the majority of exchanges in August and September originated before the first national lockdown.
“I can’t remember a time when we have had so many transactions under offer, and solicitors are really struggling to cope,” said Charlie Taylor, Knight Frank’s office head in Bath. “However, early guidance from the government might not be a bad thing as leaving it to the last minute it would have been chaotic. This may focus minds and solicitors will be able clear the backlog before March.”
The first quarter of next year could mean higher numbers of prospective buyers registering in an attempt to take advantage of the holiday, said Luke.
It is likely to produce a similar distortive effect as previous stamp duty changes. The below chart shows how transaction numbers responded to the pre-announced introduction of a 3% surcharge for second-home owners five years ago.
