New research by online mortgage broker Trussle and Legal & General Mortgage Club has revealed that the economy could benefit from a £28bn injection if the government ‘tapered off’ the stamp duty holiday rather than sticking to a hard stop.
The SDLT holiday is currently due to end on 31 March and it is estimated that as many as 105,000 property transactions could collapse if buyers are unable to complete before this deadline.
Using the average UK property price of £269,150, the value of property transactions that are likely to fall through due to the holiday’s hard stop could be as high as £28bn.
However, a ‘tapering off’ of the holiday could be an alternative and fairer way to bring the scheme to a close according to Trussle and Legal & General Mortgage Club.
This would involve guaranteeing the tax break to buyers who received a mortgage offer, for example before 1 February, helping to avoid the collapse of property chains dependent on the savings from the holiday to complete and prevent an additional swath of purchasers from rushing in, adding to the current pressures.
The research suggests that any extension to the holiday should therefore be targeted at helping people already well underway with their property purchase, to avoid any additional issues of cliff edges to the scheme.
This would also prevent a situation where HM Treasury would lose additional SDLT funds from the transactions that fall through as a result of missing the current deadline.
The businesses say that tapering the holiday could support medium term growth in the housing sector too, “supporting jobs at a time when thousands of workers have been furloughed and contractors laid off, providing medium term confidence that avoids stop-start volatility in the market”.
The sector already supports 700,000 jobs according to the Home Builder’s Federation, and it is a critical component of the government’s recovery plans and ambition to ‘Build, Back, Better’.
Miles Robinson, head of mortgages at Trussle, said: “There’s been some discussion about simply extending the stamp duty holiday beyond its current deadline.
“However, this is unlikely to solve the problems posed by a hard stop to the scheme as we’d still find ourselves in a situation where thousands of homebuyers miss out and have to front the unexpected SDLT bill.
“There will be a significant number of current buyers who are dependent on the savings from the holiday to be able to afford their house purchases, and it’s likely that many will pull out if they are unable to complete in time to meet the 31 March deadline.
“A ‘tapered’ ending, that guarantees the holiday to buyers already in the process, could avert a situation where we see thousands of housing transactions collapse.
“With the Budget fast approaching, we’re calling on the government to consider taking another look at how to bring the scheme to an end.”
Kevin Roberts, director at Legal & General Mortgage Club, added: “Amid concerns about the wider impact of the COVID-19 pandemic, the Government’s decision to offer a stamp duty holiday last year has helped to position the housing market as a driving force behind the economic recovery.
“However, the COVID-19 crisis has also caused delays in the housing market and our research shows that at the peak of activity it was taking up to 17 weeks to complete on a property purchase.
“This means there are consumers who started their homebuying journey last year in the hope of taking advantage of the tax incentive, but who are now unlikely to complete before the current deadline.
“Some of these buyers might not have put aside the funds to pay for stamp duty, which could mean their purchase falls through.
“Overall, we would like to see a broader review of property taxes including SDLT to assess the different impacts on an evolving property market.
“Until this happens, we would encourage the government to consider a tapering of the scheme in the upcoming Budget, this would help to avoid the potential for significant disruption in the housing market.
“A smooth transition would also support future growth in the housebuilding sector, which has the potential to turbocharge growth as part of the government’s recovery plans.”