Frogmarch FTBs to completion by 24th March 2012


February 16, 2012

David Gilman is a partner at Blacks Connect LLP


Beware the 24th March. The two year stamp duty holiday for first-time buyers who are purchasing properties up to £250,000 will end.


Any first-time buyer who has not completed on their purchase by 24th March will lose this tax exemption and be liable for up to an extra £2,500. This is regardless of when they made an offer or when they exchanged contracts.


The deadline is simply that the first-time buyer must have completed the purchase by the 24 March 2012.


This means all parties; the first-time buyer, the broker, the lender and the conveyancer have a duty to do all they can to ensure that the large pipeline of first-time buyer’s do complete their transaction in time.


Santander has said the tax exemption will have saved an estimated 170,000 first-time buyer’s over £300m during the two year holiday but the ultimate question must be; has it been beneficial to the UK housing market? I for one think that at best it has been neutral and at worst has distorted the market.


There is no doubt that before the 24th March we are seeing a spike in first-time buyer’s transactions with first-time buyer’s up 7% in December compared to the previous month whilst during the same period homeowners saw a seasonal decline of 2%. Also Connells are reporting an increase in valuations in January for first-time buyers with a massive 52% increase year-on-year.


Stamp duty holidays are not a new government tactic. They have been tried before in different guises. Each time the government has interfered in the housing market in this way, then history clearly tells us that it creates a short term spike in activity. However, this peak of transactions is simply purchases that have been brought forward and once the holiday finishes, we will see a slump in first-time buyer activity for months afterwards.


This is logical as purchasing a house is a massive commitment and not one that is taken lightly. So, unlike other government interventions in other industry sectors such as the scrappage allowance on old cars which did boost car sales overall, interference in the housing market simply distorts it by bringing forward transactions that would have taken place at some point in the future.


So beware the fall in first-time buyer activity come April, but in the meantime, make sure your clients who are first-time buyers get the tax exemption they are entitled to.

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