Trussle and Legal & General have warned that a ‘tapering off’ of the stamp duty holiday is a far better idea than a simple extension.
This could work by allowing those who have received a mortgage offer before 1st February to proceed.
That way the government would avoid creating a new cliff edge at the end of June, assuming last week’s the reports of a three-month extension are accurate.
Chancellor Rishi Sunak is likely to make an announcement on stamp duty when unveiling the Budget on Wednesday.
Miles Robinson, head of mortgages at online mortgage broker Trussle, said: “There’s been some discussion about simply extending the stamp duty land tax 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 31st 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.”
The stamp duty holiday is currently due to end on 31st March 2021 and it’s 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.
Kevin Roberts, director, Legal & General Mortgage Club, said: “Amid concerns about the wider impact of the COVID-19 pandemic, the government’s decision to offer a stamp duty land tax 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.”
