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Stamp Duty Deadline – What is the Aftermath for UK Property Market?
June 30, 2021 was the last day for the property buyers to take full benefit from stamp duty absence – announced last year in July. It was a commendable decision by the UK government that was imposed during global pandemic to curb its impact on the UK property market. Stamp duty absence offers buyers to save up to £15,000 on the purchase of a property worth £500,000. Interestingly, serious buyers responded well to the stamp duty holiday and a considerable surge was noticed across the UK property market – both in terms of demand and prices.
A significant step with a huge impact…
COVID-19 induced global pandemic dishevelled every sector and every country took pre-emptive measures to save economy. The UK government came forward to rescue real estate sector and temporarily abolished stamp duty on the sale of properties worth £500,000. The discount proved to be an encouraging step as several people came out to search properties, which helped the UK property sector remain stable. The tax break was initially set to expire on March 30, 2021 but seeing an impressive response, Chancellor Rishi Sunak extended the holiday till June 30, 2021 to save the sector.
Not all experts agree to this point…
Yes, despite the hefty saving, not every real estate expert considers it a commendable step, especially the extension. Despite having a positive impact, some call it unnecessary. The government was right to introduce it last year but the extension did not work well for the economic recovery, as it was supposed to be. Some even opine that the activity in the housing sector may have been stronger during the last year without discount. Well, not everyone agrees to this point but we can compare the sector’s performance prior to and after the stamp duty holiday.
Impact of UK’s general elections in 2019…
The general elections of December 2019 proved to be a catalyst for the release of frustration that had piled up due to Brexit-induced political uncertainty. However, COVID-19 put a hold on this recovery but it was subsequently amplified as people reassessed their homes, investment options during successive lockdowns. Then there came the stamp duty holiday. It proved to be a breather and stimulated wider activity in the sector but the impact of extension decision beyond its original deadline is debatable.
Why is it debatable?
When the extension was announced, most of the schools were closed and a majority of people were working from home. Not even a third of the UK population had received their first jab but most of them were planning to take benefit of the tax holiday. Interestingly, more than extension, the introduction of a taper was more significant. It is because, seriously interested people were missing the deadline and not due to any fault of their own. Still, experts believe that the extension and a three-month taper were excessive.
Property firms working 24/7…
Most of the removal companies, real estate agents, and conveyancers had been working round the clock to get maximum deals done before the deadline for people who want to secure the discount. Still, not everyone will make it because some buyers, who have already reached to their maximum borrow limit – will not have funds to pay the tax bill, due to which they will pull out. And some may not able to complete the transaction due to inefficiencies in the process.
Tax holiday distorted sales pattern…
If we gauge the price growth, the UK house price growth is in single digit but it had been above 5% for seven months and tax holiday had distorted the sales pattern. According to statistics, March proved to be a record month for transactions in the UK as more money was spent in the housing sector than since before the global financial crisis. Due to tax deadline, a number of people are reluctant to enter into the market because there is no guarantee of meeting, together the transactions are squeezed into an artificially short period, over-worked conveyancing solicitors – putting upward pressure on prices.
Supply did not pick up…
The UK realty market always shows an upward trend after Christmas and New Year holidays but this year, the supply did not pick up like it normally does. According to experts, it is due to uncertainty in the market due to new variants of COVID-19 virus and because a number of people will still consider home-schooling and work from home options, (if available). Ambiguity over missing the stamp duty deadline is just another reason not to list your property. This hesitation on the sellers’ side shows that people look for stability more than a tax holiday. Therefore, experts believe that ending the extension will be a financial hit but in a wider perspective, it will signal a return to normality that leads to stability. They are positive about the rising levels of activity in the UK property market in the second half of 2021.
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