As homebuying and property investment is an important part of the economy, the stamp duty holiday extension is welcome news. Here’s what it means for buyers and investors.
Now that Chancellor Rishi Sunak has announced the stamp duty holiday extension, 200,000 households are breathing a sigh of relief. This is according to consultant TwentyCi. Currently, there are 580,699 sales in progress. An estimated 374,000 would not have completed by the original deadline on 31st March.
With the three-month extension announced in the Spring Budget, this figure has now been reduced to approximately 174,000 households. The three-month tapering of the stamp duty holiday will provide some relief to those who will miss the deadline for the £500,000 nil-rate band.
From 1st July to 30th September, the nil-rate band threshold will be temporarily held at £250,000. Then, in October, it will return to the normal threshold of £125,000 and £300,000 for first-time buyers.
An important part of the economy
The rise in buying and selling has provided a strong boost to the economy. Homemovers are an important part of the UK’s economy. This consumer group will continue to help the nation’s economic recovery throughout the COVID-19 pandemic. And the extension to the stamp duty holiday will likely cause a further boost to the sector and economy.
Colin Bradshaw, TwentyCi’s chief customer officer, says: “The extension is very welcome as homemovers are proven to be one of the most valuable group of consumers and will provide an economic life raft to many businesses as we move out of lockdown.
“They spend more than £12 billion a year, over and above the transactional value of their new homes, equating to three percent of GDP. However, clearly hundreds of thousands of movers will still miss out on the tax saving and it remains to be seen what impact this will have on the market and wider economy in general.”
A boost for homebuyers
The stamp duty holiday extension and tapering could allow more homebuyers and investors to take advantage of the tax savings. This will likely cause the property market to remain busy over the next six months.
Robert Nichols, CEO of estate agency Portico, says: “The success of stamp duty holiday thus far does magnify just how much the current form of property taxation inhibits buyers. Suspending this taxation is giving the sector some much needed momentum and makes entering the market a far more realistic dream for many hopeful homeowners.
“The important thing for buyers and sellers to do now is act fast. Three months may seem like a substantial amount of time, but with increased mortgage applications dragging through the system, loan delays could still increase the risk of transactions not completing in time.”
Tips for landlords and investors
The stamp duty holiday has driven the high number of property transactions and will continue to do so. The additional work has inundated some lenders. According to specialist buy-to-let broker Mortgages for Business, despite these challenges, landlords looking to expand their portfolios could complete on a property in 53 days.
Mortgages for Business advise landlords to consider four factors when trying to purchase a property during the stamp duty holiday. For starters, rethink the location, as some local authorities are taking more than 100 days to undertake property searches.
Choosing a specialist buy-to-let broker with portal technology can help speed up property transactions. Additionally, carefully consider the property type. Transactions take longer for a flat. And as tenants are looking for more space, rental homes are seeing stronger demand and less void periods.
Finally, picking the right lender is more important than ever. With the extension of the stamp duty holiday and the introduction of the mortgage guarantee scheme, this could cause further delays when seeking a mortgage.
Jeni Browne of Mortgages for Business says: “Most lenders are still quoting application-to-offer times of about three weeks which doesn’t sound too long. But the reality is that these timeframes are not being met. To get deals down relatively quickly, you need to avoid lenders that are dragging their feet.”
