Stamp duty tapering will not prevent substantial cliff edge
You only have to look at the latest Retail Housing Price Index figures for March and compare them with the HMRC’s residential property transaction figures for April to see that the property market is in danger of veering out of control.
The Office for National Statistics March index revealed figures for house prices not seen since August 2007 while HMRC estimated a steep 35.7% drop in April.
With the average conveyance now taking up to 16 weeks – and longer in certain areas – it seems that the mad rush to enjoy the benefits of the SDLT holiday peaked in March.
Clearly, the primary mover of such erratic figures is the pressure on buyers caused by the end of the Stamp Duty Land Tax (SDLT) holiday on June 30. Buyers have been desperate to make savings which could total thousands of pounds. Combined with the demographic shifts we have seen with remote work-enabled house moves out of urban conurbations, a stampede to the finish has been evident.
In the meantime, along with the Conveyancing Association and the Society for Licensed Conveyancers, I have long been calling for a more substantial tapering of the SDLT holiday to ensure buyers with an agreement of sale before June (or September to take advantage of the current tapering) can complete and still make savings.
This would certainly see a steadying of the market. So intrinsically linked with our UK economy is the market, that violent fluctuations with more than a third difference in a month cannot be healthy.
Personally, I would like to see SDLT abolished altogether, and I am increasingly swayed that some form of land tax could take its place which has been estimated could raise up to £90bn a year to help the government balance the Covid books.
There is certainly some merit in looking at replacement where a housing tax proportionate to the value of the property is considered. Indeed, Boris Johnson’s former Chief Economic Adviser Gerard Lyons favours the abolition of SDLT and, if not the total abolition, at least the abolition at lower levels to avoid putting properties totally out of the reach of first-time buyers as the market surges.
There is no doubt that we will need to look at measures which do not price first time buyers out of the market altogether and get the balance right. Short term SDLT holidays – while popular with many buyers – do drive the market up, ironically beyond the reach of many looking for that first home. Long term, this is not healthy for the economy or for the property market.
However, having no stamp duty to pay at all means that first time buyers and others are more likely to be able to save up a significant deposit without having to account for SDLT.
There is no quick fix for this, and I am in favour of a longer tapering over the next year or so to calm the market down, give us all time to think and contribute to the discussion on a longer-term alternative.
Lloyd Davies is MD of Convey Law, operations director of The Conveyancing Association, and deputy chairman of the Society of Licensed Conveyancers.