Stamp duty holiday. What does it mean?09/07/20
Chancellor Rishi Sunak’s announcement of a temporary stamp duty holiday on the first £500,000 of all property sales in England and Northern Ireland is designed to boost the residential property market.
The tax threshold has been temporarily raised from now until March 2021 to help buyers struggling because of the coronavirus crisis.
In that period, buyers will only start to pay stamp duty on the amount that they pay for the property above £500,000. These rates apply whether they are buying their first home or have owned property before.
Prior to this announcement, stamp duty on a £500,000 house would have been £15,000. The average saving will be £4,500, with nine out of ten buyers likely to pay no stamp duty at all. Anyone buying a second home or a buy-to-let will still have to pay a stamp duty surcharge, which starts at 3%.
Clearly, this measure has been taken to increase the number of potential buyers and stimulate market activity. There is, of course, a risk that initially there will be an increase in buyers but a lag in new properties being brought to the market. This may lead to under supply which could push house prices up.
It is good news for sellers, who will be in a stronger position when negotiating, as the buyer only has six months to close the deal. It is in the buyer’s interest to share the stamp duty saving with the seller, just to get the deal over the line. Again, this may artificially raise house prices in the short term.
Unless the Welsh Government follows suit, with a similar boost for Wales, this may lead to some interesting decisions being made regarding house purchases along the English-Welsh border.
Undoubtedly, this move by the Chancellor will increase activity in the wider economy, which is one of the key motivating factors.