Stamp Duty Uncertainty Unnerves Market
It’s only been a matter of days since the Chancellor Rishi Sunak conducted an interview with newspapers discussing potential alterations to stamp duty land tax (SDLT) in a bid to continue to help the housing market recover from the coronavirus.
However, the uncertainty has begun a ripple effect across the market, resulting in professionals in the industry venting their frustration about the Governmental leaks.
Many national newspapers have reported that the Chancellor will tomorrow (Wednesday) reveal the principles of a stamp duty change. This could be one of two options; either a six month holiday, or selected short-term changes at the mid and lower end of the market.
However, change doesn’t appear to be imminent with further suggestions from Government revealing that the options will only be discussed tomorrow, with changes not implemented until the Autumn Budget.
But where does this lead buyers? After the uncertainty of Brexit, the housing market was beginning to slowly pick up before it was wiped out by Covid-19. This additional layer of uncertainty will – according to some – will cause buyers to dither as they wait to see if they’re able to pay less SDLT or none at all.
Sean Reeves, Head of Residential Conveyancing at Letcher’s Solicitors, said:
“Jeremy Hunt said on Radio 4 this morning that he did not think a change in Stamp Duty would have an impact on the market, however, I have had several clients ring me this morning contemplating putting their plans on hold until such time as the SDLT has been clarified as they think they may be able to save money and rightly so I would do exactly the same, however, this is counterintuitive as this will stall the market not enhance it and I am already experiencing this.
“With the continued gossip and lack of certainty it is causing the market to stall. The issue is compounded by the complete of support for first time buyers. I have had three clients this week who had an agreement in principle and after they submitted their application the lender had withdrawn their offer. They have already spent money on searches and surveys all of which they cannot get a refund for. These first time buyers were all obtaining between 85% and 95% LTV mortgages.
“In my opinion the government should be looking to support first time buyers and working with lenders much the same as they did with the last crisis whereby, they guaranteed the last 5%-10% of the 90% and 95% LTV.. This will then support the bottom of the market which will facilitate the market upwards.”
Maria Richards, Partner, Residential Property at Coodes, said:
“It is anticipated that the imminent announcement will reveal that the stamp duty threshold is temporarily raised from £125,000 to between £300,000 and £500,000 but we don’t know yet whether this change will be imminent or whether it will be implemented in the autumn budget. If it is the former, this would have a positive effect on the market. At Coodes LLP we have already seen a surge of activity following the restrictions on moving home being lifted in mid-May and a SDLT holiday would continue the positivity in the market. However, if this not implemented immediately it could have the opposite effect with many buyers putting their plans on hold until they are able to take the benefit of the savings. First time Buyers may not be hugely affected, already having access to a relief. What isn’t clear is how this is going to affect the Buy to Let market. The 3% surcharge is already a deterrent to investors and to fully stimulate the housing market post lock down the government also need to focus on this sector. Transaction levels are driven by a rise in demand for rental properties and for the market to be healthy and sustainable all buyers, whether first time, investor, or subsequent homeowners, need to confident in the same. “
Jeremy Leaf, former chair of the residential faculty of the RICS and the owner of a London Estate agency, said:
“Please either announce that you are changing it one way or another. Please don’t say you are thinking about it or it may be introduced in a few months. Otherwise, you will stop the market in its tracks as buyers and sellers wait to see what will happen before making decisions and you will kill off any or much of the growing increase in activity we have seen since lockdown restrictions were eased.”
Stacks Property Search, a buying agency, tweeted yesterday:
“More uncertainty and a brake on the market as buyers wait for the autumn?”
A statement from Tom Bill – head of UK residential research at Knight Frank – said:
“The government understands that moving house has far-reaching benefits for the UK economy and this may form part of a wider re-think of property taxation that recognises this strategically important role. However, it would need to be introduced immediately to prevent buyers from putting plans on hold and losing the momentum that has built since the market re-opened.”
Tom Parkinson, Head of Property & Director at Rowlinsons Solicitors, said:
“If true, it would certainly be welcome news and one which would provide the property industry with a much needed shot in the arm. That said, it seems that someone has perhaps spoken prematurely, and if a formal announcement isn’t made immediately, there will be much debate among buyers and sellers as to whether exchanges and completions should be delayed in the hope that SDLT savings can be made. We have already this Monday morning received multiple requests from clients asking for their matters to be put on hold, pending more detail. This type of uncertainty is clearly not good news for the market.”
Paul Sams, Partner at Dutton Gregory, said:
“I have had fifteen emails from clients this morning asking me about what I know about the proposed changes. Personally I think that a stamp duty change could help if done in the right way. I don’t for one second suggest that this is the right way but given the huge demand on the rental market at present a cut to the higher rate of SDLT for landlords looking to purchase to let property might be a controversial but welcome solution to one of the issues facing housing as a home. Some sort of mortgage guarantee backed by HMRC for lenders who loan at above 90% loan to value might have more benefit to the market though than SDLT changes.”
Sally Holdway, Director at Teal Legal, said:
“What we need right now is stability, and whilst the proposed stamp duty cuts are well intentioned, I worry that they will do more harm than good. Many commentators are already warning that the beginning of next year is when the risk of a downturn is highest, after redundancies have started to bite following the withdrawal of the furlough scheme, resulting in many buyers not reaching lender affordability criteria Any plan for a 6 month stamp duty holiday would be coming to an end at precisely the time when the market is predicted to contract, throwing the industry into an unwanted cycle of (relative) boom and bust.
“It will certainly mean a busy time for conveyancers at the end of the year though, with all the joy that Christmas Eve completions bring.”
Tom Ansell, Conveyancing Solicitor, said:
“I am broadly for the proposals as long as they are brought in without delay. Any delay would stall the market so it’s essential that doesn’t happen. I also think that there are other things that could help as well. Mortgage products for first time buyers with smaller deposits are not as readily available on the market. It might be better for there to be some sort of mortgage guarantee for these people to come to the market again. However, anything that provides extra stimulus to the market is welcomed so I look forward to hearing about the proposals when announced!”
Anthony Codling, Chief Executive of Twindig, doesn’t think any changes to SDLT will help first-time buyers at all. He said:
“If we take the home costing just under £300,000 the first-time buyer stamp duty is nil but a five per cent deposit is £15,000. Most lenders have stopped offering 95 per cent Loan To Value mortgages during the COVID Crunch with most focusing on 85 per cent LTV which takes the deposit from five per cent or £15,000 to 15 per cent or £45,000” he says.
“Making changes to Stamp Duty will not address the bigger issue of helping first time buyers secure a big enough deposit to get on the housing ladder.”
It seems we will all be waiting with baited breath later on today for the Chancellor’s speech.
What are your thoughts on these rumoured SDLT changes?