The chancellor is reportedly planning to extend the stamp duty holiday to June, saving buyers an estimated £1.75bn on 300,000 additional transactions.
The move would encourage activity in the housing market as the country emerges from lockdown. The extension would apply to sales of properties worth up to £500,000 and could cost the Government £1bn. The UK raised the threshold of property tax from £125,000 to £500,000 last July, thereby exempting nine out of ten house buyers from stamp duty.
The temporary cut is due to expire in March, but Mr Sunak is expected to use his annual budget to move the deadline to the end of June. This would bring it line with the lifting of lockdown restrictions.
There are around 628,000 sales still going through the legal process, including those agreed last year, the latest data from Rightmove shows. If the deadline is not extended beyond the planned cut-off point of March 31, the property portal reckons that 100,000 buyers who agreed a purchase last year could miss out on the savings.
Yet property experts are divided as to whether the extension would be a beneficial move.
Extension ‘inherently fair’
Lisa Fretwell, MD of data services at Experian, believes the extension would provide much needed latitude for people in the process of buying a home. Extending the deadline, she says, would help these buyers complete their purchase in good time and provide a welcome uplift for the mortgage market.
Tom Bill, head of UK residential research at estate agent Knight Frank, thinks an extension is ‘inherently fair’, given that it will address the problem that parts of the conveyancing system have been overwhelmed, which in turn has put completion dates at risk.
But, he says, there will come a point at which the stamp duty holiday will ‘outstay its welcome’. He argues that a greater degree of seasonality needs to return to the housing market as lockdown restrictions are lifted in the months ahead.
A greater sense of normality would mean buyers and sellers taking heed of the calendar year rather than the tax year. And an ever-changing tax liability, he added, would put additional pressure on the supply and demand sides in the housing market, which need to stabilise.
By contrast, Matthew Cooper, founder of house-buying firm Yes Homebuyers, maintains that the extension would increase pressure on the system, causing further delays. He regards it as irresponsible to add fuel to the fire by extending the deadline, adding that a considerable number of deals are in danger of failing, bringing property values down with them.
Cooper sums up the situation as one of the Government taking a ‘head in the sand’ approach to dragging out the inevitable, rather than offering a genuine helping hand to home buyers.
Stamp duty one of the worst taxes
But Julian Jessop, economics fellow at the Institute of Economic Affairs (IEA), goes further and believes the tax should be abolished altogether. Many economists, he says, agree that stamp duty is one of the worst taxes, because it acts as a disincentive for those who wish to move to more suitable housing or downsize.
Furthermore, it makes no sense that the tax levied on a property depends on how often it changes hands. Now is the right time, he believes, for a root- and-branch review of how property is taxed, with the goal of simplifying the system and letting local authorities keep a higher proportion of revenue raised in their area.
Meanwhile, UK house prices recorded a surprise surge this month as buyers were apparently undeterred by the looming stamp duty holiday deadline. The average price of property coming to market increased by 0.5pc, or £1,511, this month after three consecutive monthly falls.
The number of new buyers has continued to grow despite the fact that it is now too late for most to beat the stamp duty deadline of March 31.