Conveyancing solicitors have warned chancellor Rishi Sunak that extending the stamp duty holiday in next week’s Budget would risk creating a bigger paperwork logjam and lead to further increases in house prices.
The Conveyancing Association, the Society of Licensed Conveyancers and the conveyancing network Bold Legal Group have written to Sunak urging him to avoid creating another “cliff-edge” should he postpone the end of the holiday by three months until June.
Instead, they called for an extension to apply only to transactions where a solicitor had already been formally instructed to act for the buyer on the purchase of a specific property on a specified date.
“[Purchasers] should still be allowed to complete their purchase with the stamp duty concession provided completion of that transaction takes place within (say) 12 months,” the letter said.
This would eliminate the deadline pressure and allow transactions to proceed at their natural pace, was simple to legislate and would prevent “a stampede of homebuyers trying to take advantage of the extension”, it added.
Solicitors are under intense pressure from clients to complete purchases by March 31, when a nine-month stamp duty holiday comes to an end. It means buyers currently pay no purchase tax on the first £500,000 of a home, a measure worth as much as £15,000 to buyers.
But the policy has stoked demand and created bottlenecks in the homebuying process at a time when professionals are homeworking or dealing with absences due to the Covid-19 pandemic.
Fears among lawyers that the situation would not be resolved next month were sparked after a report in the Times this week said the holiday will continue until June. The Treasury has not denied the report.
“The surge in demand created by the holiday and the necessary current lockdown has led to significant property transaction bottlenecks as consumers rush to complete in time,” the letter said.
Rob Hailstone, chief executive of the Bold Legal Group, told the FT some solicitors had been striving to get through the backlog of demand for completion, but were facing delays in search information at local authorities as well as “volatile conversations” with clients.
Without a mechanism to ensure that demand does not continue to rise over the next three months, Hailstone said solicitors feared the problems would only worsen — and push up house prices further.
Average UK house prices increased 8.5 per cent in the year to December 2020, rising at their highest annual rate since 2014 to reach a record high of £252,000, according to data last week from the Office for National Statistics.
Beth Rudolf, director of delivery at the Conveyancing Association, and a signatory to the letter, said the time between instruction and completion had more than doubled to around 22 weeks since the stamp duty measure had been launched in July 2020, and feared a simple extension would worsen this delay.
“Conveyancers are frustrated because they feel an extension of the deadline will just encourage more people to enter the pot.”