PART 1: Stamp Duty holiday, what does it mean for those buying and selling?

By Aiden Johnson-Hugill, Director at Grenadier and Louise Glanville, Associate at Knight Frank Exeter

Expected to save some property buyers as much as ￡15,000, the new stamp duty holiday introduced by Chancellor Rishi Sunak will be a welcome relief to many home buyers. With an increased threshold from ￡125,000 to ￡500,000, buyers in England and Northern Ireland can benefit as the ‘average stamp duty bill will fall by ￡4,500’*.

This stamp duty holiday, which was announced on the 8th July 2020, will be in place up to the 31st March 2021 and is envisioned to provide a much-needed boost to the housing market in England. First time buyers will be familiar with the usual stamp duty exemptions of up to ￡300,000, but these new measures will not just allow first time buyers to save on stamp duty fees up to ￡500,000, it will also benefit investors, those buying a second home, and those looking to relocate from the city to countryside.

Whether you are buying a holiday home, investing in property, downsizing, or getting your foot on the property ladder, the tax break is expected to accelerate house sales between now and early next year, as buyers look to save costs.

‘Now or never’ mentality

It is not just cost savings that are expected to hasten buyers and sellers to move fast, it is also the opportunity to be able to afford more expensive homes. With home buyers often constrained by tight budgets, an ‘extra ￡5,000-￡15,000 can really make a difference to where you live and what kind of property you buy’, says Aiden Johnson-Hugill, Property Developer at Grenadier.

‘As home buyers look to purchase more sustainable homes to do their bit for the environment and save money on running costs through the use of solar panels and sustainable heating methods, this could be a welcome opportunity to allow those to make the move to an eco-home.’

‘It’s also a matter of relocation’, says Louise Glanville, Associate at Knight Frank. ‘People living in the city are now also making the move to the countryside because of lockdown, which means we can expect more buyers looking to relocate out of big cities as part of this now or never mentality.’

Louise continues, ‘We’ve seen it in recent weeks, buyers looking for a quiet retreat, away from busy towns and cities but close enough to transport links, allowing them the best of both worlds. A stamp duty break will allow everyone, not just those who can afford a second home, but those people who are trying to get on the property ladder, to get the home they want, all whilst giving the economy a much needed boost.’

‘We’ve all used lockdown to reflect on our day-to-day living, whether that’s working from home from a city-centre apartment, a flat with little desk space to accommodate home working, or a countryside home with green space and a garden, what we’ve all no doubt done is consider what’s important for us, and that always starts at home’, says Aiden.

‘Since the lockdown commenced it has been a challenge to reassure buyers and get them to the point of exchange. The overall uncertainty everyone has been feeling over the last four months plays an important role in the decision of whether to commit to buying a new home. Buying a home is never an impulsive process but I think now that the tax break has been put in place, it will reassure and provide confidence in the market, because those people who have already put the money aside for their dream home will now be unexpectantly saving as much as ￡15,000. I’ve spoken with buyers in the middle of the purchase process in recent days who are ecstatic they now have some extra money to put towards a new bathroom, or a new car, or even simply their savings. It will come as a welcome relief to many, especially first-time buyers’, says Louise.

Will house prices increase?

The forces of supply and demand are inevitable, but does a tax break necessarily mean house prices will increase?

‘Perhaps’ says Louise. ‘Those who can afford to buy a second home or purchase properties at higher prices will benefit most from the break. Although that does not necessarily mean those who aren’t spending over ￡500,000 shouldn’t wait to buy or sell as those downsizing or looking to relocate could save an average of ￡4,500, which can be reinvested into the property price or used to make interiors changes to a home. We might see an initial increase in some property prices, but I do not anticipate property prices increasing dramatically over night. It is a careful balance of supply and demand, and I think those who put their sales or purchases of homes on pause around lockdown will be given the confidence to pick their search back up and reap the rewards of the tax break.’

Aiden believes the stamp duty holiday will simply allow more people to get onto the property ladder. ‘I think once we are into Autumn, more people will gain confidence in the market and sales of house prices will rise again. If you’ve found your dream house, you shouldn’t be worrying about the prices going up or down in the next month, you should be seeing it as saving a lump sum that a couple of weeks ago you’d be paying out to HM Revenue & Customs. The break should give many buyers a foot up onto that ladder, and that’s a good thing.’

Both agree they think that house prices will not immediately rise but instead those people buying and selling pre or during lockdown will simply be picked back up again, which will be a relief for many.

‘Knight Frank are currently undertaking research into how the market will potentially change due to the announcement around stamp duty, and we expect an insight over the next couple of weeks’, says Louise.

How much can I save?

Inevitably there are stories of those whose houses completed the day before who are not all that happy about the announcement, but for those in the process of buying or looking to buy you can expect to save something.

Zoopla have put together a useful interactive table to reveal how much buyers can save, take a look: https://www.zoopla.co.uk/discover/property-news/is-it-time-for-a-stamp-duty-holiday/#:~:text=The%20stamp%20duty%20holiday%20will,will%20fall%20by%20%C2%A34%2C500.

END

*Zoopla, https://www.zoopla.co.uk/discover/property-news/is-it-time-for-a-stamp-duty-holiday/#:~:text=The%20stamp%20duty%20holiday%20will,will%20fall%20by%20%C2%A34%2C500.