How the stamp duty holiday is boosting the UK property and stock market

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In July of this year, the British government announced a stamp duty holiday in an effort to boost the domestic property market.

Chancellor Rishi Sunak said that the ‘holiday’ would pertain to property buyers as a part of a stimulus plan designed to jump-start the UK economy following the COVID-19 lockdown. As a part of the measures, the threshold for stamp duty would be temporarily increased to GBP 500,000 from its previous rate of GBP 125,000.

The holiday will be in place until at least 31 of March next year, giving an opportunity for citizens to purchase property with a lesser stamp duty burden. Stamp duty is a tax that is levied on property transactions in England and Northern Ireland.

Sunak said that he hopes it will help buyers feel more confident in buying, selling, and renovating properties, which in turn will drive growth and create jobs.

Its impact on the stock market

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While the announcement was welcomed by most buyers, concerns were raised about how it could impact the property market, as well as the performance of FTSE futures live. Initially, the news increased stocks of house building companies, but some analysts predicted it would cause an “artificial” increase in property prices that would be followed by a slump.

However, it seems that renewed interest and incentive in investing in property will create a prime market for investors. It has been something of a tumultuous year for stock market investors, particularly in the UK, which was one of the worst affected globally. Now, investors and traders will be keeping their eyes on the FTSE futures live on trading sites to track the performance of some of the largest property companies, in order to spot an opportunity for profit.

Shares on the rise

The move will certainly reduce the tax bill of property investors as many as 90% will not pay stamp duty for the duration of the holiday. This could encourage as many as 41,000 additional property sales during this period.

As a result, share prices of some of the country’s biggest housebuilders began to rise. After a stagnant first quarter due to the pandemic, Savills and Persimmon were just some that noted an increase as high as 10%.

Property rent and sale listing website Rightmove had noted a share price decrease of 15% since the beginning of 2020. But, like others in the industry, they anticipate better days ahead. The day after the announcement by the UK government, the site experienced one of its busiest days with over 8.5 million visitors. This will hopefully translate into more clients and an increase in share prices, at least in the short term.

Overall, the holiday has stimulated activity within the British real estate market. This applies to firms operating in construction, estate agents, developers, and businesses providing online real estate services. Between the date of the announcement and the first week of August, the number of sales for properties under GBP 1.5 million increased by an impressive 146%.

There are many uncertainties that lie ahead, and the pandemic (combined with Brexit) has done little to alleviate them. Although, with action from the UK government and various incentives designed to stimulate the property market, it’s hoped that both the housing sector and the FTSE will recover.