The industry has been reacting to the news that the stamp duty holiday could be extended to June in the upcoming March Budget.
Some have warned against an extension, suggesting that more problems could arise and that it is delaying an inevitable ‘cliff edge’, whilst others have welcomed the news.
Simon Nosworthy, head of the residential property department at Osbornes Law, explained that while the stamp duty holiday has provided a boost to the housing market, he believes that letting the holiday conclude on 31 March “would not be a bad thing.”
He said: “Conveyancers like me and estate agents have probably never been busier thanks to the holiday.
“There have been lawyers having to turn away business while some local authorities have struggled to keep pace with the number of searches requested.
“While this has undoubtedly boosted business and the economy generally, unless the Chancellor decides to abolish stamp duty forever then the holiday can’t go on indefinitely.”
Nosworthy believes that a straight extension would simply mean a different set of homebuyers would not be able to receive the tax relief.
He added: “One major problem with the stamp duty holiday is that it has created an artificial bubble that has seen house prices rise by 8.5%.
“There is a real risk that prices, having been artificially inflated, may well go down when the holiday ends.
“Those who bought during this period may find they have overpaid, potentially negating any saving they made from not paying stamp duty.
“The holiday has reportedly saved house buyers £5bn, which is unsustainable for the exchequer.”
Property law specialists Adcocks Solicitors are calling on the government to incorporate a paperwork deadline to ease pressure and avoid similar circumstances at a later date.
Hedley Adcock, director of Adcocks Solicitors and member of Birmingham Law Society, said: “The SDLT holiday has had the desired effect across the country, however the deadline is adding great uncertainty on the housing market.
“With buyers taking high-risk strategies to speed up the process, such as skipping essential property searches and not having the property valued, the rush to complete has never been riskier.
“If an extension is announced next week, it is essential that a tapering off period is also granted, such as a paperwork deadline.
“In other words, buyers who have either exchanged contracts but not completed, or those who can demonstrate they have started a transaction before the deadline and have incurred solicitor costs, for example.
“This so called ‘grandfathering’ of the SDLT holiday would ease the pressure on the current backlog and ensure searches or valuations are not ignored in order to receive the tax relief.
“Our worry is that if the deadline is simply extended, we can expect to see buyers continue to take unnecessary risks to aid the moving process in a few months’ time.”
Looking to data collected by Rightmove, if the stamp duty holiday is extended until June, an additional 300,000 property transactions in England could benefit from the tax saving.
If an additional 300,000 transactions made it through, buyers could save £1.75bn in total.
Based on the current sales that have been agreed in England, 80% would pay no stamp duty due to this holiday.
There are an estimated 628,000 sales in total still currently in the legal process across Great Britain, including those that were agreed last year and those that have been agreed so far this year.
Currently, Rightmove estimates that 100,000 buyers who agreed a purchase last year are set to lose out, if the deadline stays as 31 March.
Nitesh Patel, strategic economist at Yorkshire Building Society, believes that the potential extension should be welcomed however has called on the government to consider a taper over a straight extension.
He said: “We urge the government to reconsider at a taper of the tax relief – a period of grace which would allow any property sales which have been agreed and have secured a mortgage approval given a set period of time to complete their transaction with stamp duty reduction benefit.
“If the policy is merely extended, we may well face the same situation of home buyers who are caught out when the extension comes to an end.”
In addition, Patel outlined that bringing the policy to a halt on March 31 is likely to cause issues for potential buyers, who have agreed a sale and have a mortgage in place, but will not have time to complete before the deadline.
Martijn van der Heijden, chief of strategy at Habito believes that without an extension gaps may open in property transactions, which could lead to chains collapsing.
He said: “Any extension will give home-movers more confidence that they’re not on the line for an unexpected tax-bill and risk pulling the plug on their purchase.
“However, the tax break has also clearly had a huge impact on house price growth, which for the year was up 8%, according to the ONS.
“This in turn, affects affordability. Given the Conservatives’ commitment to getting young people on the property ladder, it’s only right that there is not a long-term extension of the scheme.
“It’s an expensive tax-break for the Treasury to run, and there’s likely to be strong calls for tax-breaks to be offered elsewhere as the economic recovery starts in the summer.
“With there being calls for the tax to be fully scrapped, we wait to see whether that happens and what a replacement scheme may look like.”