With days to go until the phased ending of the stamp duty holiday, thousands of homebuyers will be desperately hoping they can complete their purchase before Wednesday night, because if they don’t they face having to find as much as £15,000.
A significant proportion of home purchases – some agreed as far back as the spring – are thought to be hanging by a thread as conveyancing solicitors struggle to complete purchases before the 30 June deadline.
It is feared that buyers who have already borrowed up to their maximum limit, but who miss the deadline, will not have the extra funds needed to pay their resulting tax bill and will be forced to pull out – potentially putting a chain of sales at risk. Even before this week, some solicitors have been working until 1am every night in an effort to complete as many sales as possible.
Analysts are also waiting to see the impact that Wednesday’s deadline has on the overall housing market, which has been repeatedly described as having been “turbo-charged” by the tax break.
The stamp duty holiday was introduced in England and Northern Ireland by the chancellor, Rishi Sunak, in July 2020 to kickstart the then struggling housing market. Buyers pay no stamp duty on the first £500,000 of the purchase price, provided the purchase completes before the end of June.
The threshold at which stamp duty begins in England and Northern Ireland is falling to £250,000 on 1 July. In September it returns to the pre-pandemic level of £125,000. First–time buyers can purchase homes costing up to £300,000 without incurring stamp duty from 1 July.
The Law Society has warned that “stressed and under-pressure solicitors have been working late into the night and over weekends, with little or no work-life balance” ahead of the deadline.
Solicitors have called for the government to amend the deadline to the exchange of contract, rather than completion, to ease pressure on those involved in the house-buying process. Removal companies are reported to be fully booked this week.
Despite the holiday, the Treasury has taken £4.2bn in stamp duty so far in 2021. Stamp duty receipts for May were £652m, down by about a third on April’s figure but 81% higher than May 2020.
It has led to calls, including from the Coventry building society, for the stamp duty holiday to be made permanent.
Jonathan Stinton, the head of intermediary relationships at the Coventry, said keeping the threshold high would help to “normalise the market and take at least some of the financial burden off of the average homebuyer”, something Sunak has so far resisted.
It remains to be seen what impact the stamp duty holiday’s removal will have on prices that boomed to record levels over the last year.
Rhys Schofield, the managing director of Belper-based Peak Mortgages and Protection, believes the market will take the end of the stamp duty holiday on the chin.
“With hordes of potential buyers for every property hitting the market, even those sales that do fall out of bed will be snapped up very quickly. Buyers are champing at the bit for property.
“If anything, the stamp duty holiday spectacularly did its job to get the market moving after the first lockdown but it is now causing more problems than it solves, creating an artificial bottleneck that is now preventing other transactions from going through as conveyancers have been swamped by people trying to hit this deadline.”
Iain Swatton, head of intermediaries at the mortgage firm Dashly, is not expecting the market to implode.
“The property market is as strong as ever and a more sensible prediction is that after the stamp duty deadline has passed, we’ll likely see more of a soft landing and slowed activity levels.
“We may also see more of a culture of ‘improve rather than move’. As the economy recovers, those who were able to save during the pandemic may consider finally getting round to that loft extension or revamping the family bathroom.”