Chancellor of the Exchequer Rishi Sunak has confirmed a stamp duty holiday in a bid to boost movement in the housing market.
The change will take effect for those buying houses valued up to £500,000 and will last until 31 March 2021. The new discount comes into force immediately. As a result of the change, nine out of 10 buyers will pay no stamp duty at all.
Stamp duty is a tax levied on those buying property or land above a certain value. Currently, all house-buyers in England and Northern Ireland must pay stamp duty on properties over £125,000. First-time buyers are exempt from stamp duty on properties worth up to £300,000, or, in higher priced areas such as London, on the first £300,000 on properties costing up to £500,000.
Walker Crips Property Income director James Allen warned the move risked greater volatility in the long-term.
He said: “Unfortunately, the chancellor has not learnt the lessons from a recent Tory incumbent in his post. When former chancellor Osborne touted his change to stamp duty, there were concerns from the market about a spike in transaction completions before the rises came into effect, followed by a dramatic slowdown with tax takings falling in relative terms. All of these things subsequently happened.
“We now have a new policy that looks like history repeating itself. The stamp duty ‘holiday’ is likely to increase transactions in the sub-£500,000 market, adding liquidity and volatility into an already liquid part of the market. Tax take will obviously fall and, at the end of the holiday, transactions are likely to slow significantly again, risking price volatility at a time when the market is craving stability.”
He added: “In order to achieve the chancellor’s aim of protecting the housing market, the most obvious route would be to simply reverse the counterproductive changes introduced by Chancellor Osborne. We know what effect they had when introduced, so we can say with high conviction what effects their reversal could hold.”
Meanwhile, John Tonkiss, CEO of property developer and manager McCarthy & Stone, described the announcement as a “no brainer”, and one he “wholeheartedly” supported.
“We’ve long argued that high moving costs have stunted the housing market. They keep older people stuck in large homes and prevent new chains being created that would ultimately benefit young people and first-time buyers. The chancellor’s announcement today should be extremely helpful to get people moving,” he said.
“The timing is also important given the pandemic’s impact on the housing sector over the last few months. Hopefully, it will help older people who have struggled in unsuitable housing during the crisis to feel supported to make a move to somewhere that can better meet their needs, be it a bungalow or a retirement community.”