2008 SDLT holiday – Have we learnt our lesson?
As the residential property sector continues to be pushed to the limit, leaving conveyancers and consumers stressed and fatigued, will there be lessons learnt from the last Stamp Duty Land Tax Holiday (SDLT) over a decade ago?
In a bid to lift the market following the financial crisis back in 2008, the then-Chancellor Alistair Darling suspended SDLT for a year on properties worth up to £175,000 which cost £600m. Fast forward over 10 years and the Government is now removing SDLT up to a £500,000 threshold, which measures the severity of the current crisis, as it is estimated to cost £1.3b to the Treasury.
The current SDLT holiday is shorter in comparison to its 2008 counterpart, which is 9 months, ending on 31st March 2021.
Views and opinions of the current holiday is being debated with an online petition underway for the extension of the SDLT holiday. With the experience of the 2008 crisis and the end of the SDLT holiday, Today’s Conveyancer asked experts in the field their thoughts on whether there will be a nuanced approach to the termination of the SDLT holiday, such as an extension/staged end, rather than a “cliff edge” on the 31st March.
Michael Day, managing director at Integra Property Services believes the Government should have took this opportunity to reform stamp duty entirely. He said:
“Whenever Government announces a short term stimulus or sets a deadline it tends to create an artificially strong market for a period followed by a slamming on of the brakes. Nevertheless, they still do it!
“From the end of dual tax relief in July 1988, previous stamp duty changes and Help 2 Buy the history of the property market is littered with such examples.
“The current stamp duty holiday was, in my opinion, not required to stimulate a post lock down market, as demand was already strong as shown in the first quarter of 2020 activity. The current scenario has undoubtedly fuelled much greater levels of activity but, in reality, has probably only brought forward transactions that would have been spread over a longer period. Of course, the clock is ticking and many parts of the industry (conveyancing, searches, mortgage lending, leasehold management etc) are struggling to keep pace with the volume and service levels have deteriorated and transaction times lengthened.
“Reports indicate that, on present data, many sales currently underway will fail to meet the March 31st deadline which could be catastrophic in terms of abortive transactions. Certainly the period leading up to the deadline is likely to be fraught and transactions unlikely to complete will face renegotiation with all the issues of new mortgage offers etc coming to the fore.
“In my view the Government should be taking the opportunity to reform stamp duty completely during this period both to alleviate the risk of a “cliff edge” scenario but also to create a fairer form of taxation going forward.
“Providing an extension to the deadline might help reduce the immediate pressure and transactional numbers may quieten down and become more manageable but would likely still leave a situation where another future date arrives like a brick wall.
Karl Post, partner at Dean Wilson LLP believes an extension and staged end to the current SDLT would be a positive move for all involved. He said:
“There is no doubt that the Stamp Duty Holiday this summer has ignited the property market. Across the industry, from agents to surveyors, lenders to solicitors, we are all feeling the pressure of the surge of demand that has resulted. I expect this to continue right through to March 2021 when the scheme is proposed to end.
“When we look back to 2008, the last stamp duty holiday, and even consider the surge of demand for property prior to the introduction of the second home surcharge in 2016, we know that sudden changes in stamp duty changes can have both a positive and negative effect.
“Like most of my industry colleagues, I would welcome both an extension and staged end to the current stamp duty holiday. Allowing the market to retract steadily from the current demand could only be a positive for all those involved. It seems counterproductive for the government to push for lenders to provide 95% mortgages whilst simultaneously reintroducing the previous stamp duty rules.
“A sensible approach is needed from the government to prevent a sudden crash from April 2021”