Will Home Buyers Go On A Stamp Duty Holiday In 2020?

Between column inches in the popular press about airbridges (or not), listing non-quarantine holiday destinations and telling readers about the price of a pint in Spain, stories are circulating about the perceived benefits of a stamp duty (SDLT) holiday on the UK housing market.

Prior to the likely announcement on Wednesday 8th July 2020, I’d like Rishi to know that I’m in two minds about this. Prior to commenting and working on the premise that history does repeat itself, I wanted to find some facts and figures about the effectiveness of the last SDLT holiday. This was hard to find.

There is a House of Commons Library Briefing Paper (Number 7050, 25 June 2020) which over 77 pages takes a detailed look at Stamp Duty Land Tax on residential property. It mentions historical SDLT holidays and confirmed that I’m right to be questioning holiday effectiveness.

Over 10 years ago, on 24 March 2010, a temporary relief from SDLT for purchases of residential property up to £250,000 was introduced. The relief applied where the purchaser was a first-time buyer and occupied the property as their only or main home. It applied for transactions with an effective date (normally the date of completion) from 25 March 2010 to 24 March 2012.

This relief was group specific, with stringent rules, designed to provide targeted relief. When it ended, the effect was analysed[1]. The analysis concluded that the relief did not have a significant impact on improving affordability for first-time buyers.

I’ve been on the conveyancing industry rollercoaster since 1992. The UK places an enormous amount of worth on home ownership, and I think there should be two themes running through any July 2020 SDLT holiday.

First theme –immediate action – Rishi needs provide financial stimulus for sectors where the Government considers it is needed. Any SDLT stimulus needs to be balanced against a background that immediacy will not “fix” the UK housing market. an SDLT holiday has the potential to benefit those who are “purchase ready,” by this I mean have a deposit saved and are able to complete a purchase during any SDLT holiday period. This will be of benefit to buyers, purchasing under the threshold figure who don’t require a mortgage or satisfy current loan to value criteria to secure a mortgage.

Second theme – affordability. Affording a home is not addressed by a SDLT holiday. Younger people, who aspire to home ownership are really feeling the impact of the Covid-19 pandemic. Securing the long-term health of the UK property market, requires a larger policy piece around widening access to home ownership for young people in a cost-effective way, as any aspirations they had of home ownership are fast dissipating, as hours are cut and jobs lost.

In this regard Rishi needs to heed the words of Jonathan Reynolds MP, “stamp duty land tax cuts risk further inflating a housing bubble that is snatching the idea of home ownership out of reach for the younger generation”.[2] I

In the Commons Library Briefing Paper Urban Vision thought that any changes to stamp duty, contributed, “a relatively small proportion of the cost of buying a house”, and would not improve affordability as raising a deposit to buy a home was a much more important consideration[3]

So, Rishi – I implore you and those at the Treasury to realise that medium to long term it’s affordability rather than tinkering with SDLT rates that will add benefit the UK housing market.

Are you are satisfied that an SDLT holiday will have a tangible benefit? If not, then why are you contemplating this?

Finally, if you’re wondering, I am truly invested in increasing transaction levels, so that I can get back to work, but I really BELIEVE that Government actions should be based on smart economic decisions, rather than an attempt at a quick fix.

[1] https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/331717/sdlt-ftb-workingpaper.pdf

[2] As set out on Page 53 of House of Commons Library BRIEFING PAPER Number 7050, 25 June 2020

[3] Select Committee on Economic Affairs, Building more homes, HL Paper 20, 15 July 2016, para 234

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