The news that a petition calling for an extension of the Stamp Duty holiday beyond its 31 March deadline has exceeded 100,000 signatures does not come as a surprise, but perhaps what is more surprising is the government’s reluctance to address the financial dangers of the issue facing buyers that look set to miss the window. This is due in no small part to the current adjournment of Parliamentary debates put forward by the Leader of the House, the Rt Hon Jacob Rees-Mogg, on 13 January, throwing any such discussion up in the air until sittings are rescheduled sometime in the future. Fortunately, however, the petitions committee has elected to circumvent the ban on Westminster debates with an virtual meeting at 4.30pm on 1 February.
Such a debate on extending the Stamp Duty holiday is critical as many buyers are facing the unwelcome prospect of fees that they may not have factored into their planning. Rightmove estimated this week that of the approximate 613,000 sales agreed in the pipeline, there are around 100,000 sales that look set to miss out on Stamp Duty savings of up to £15,000.
The imminence of the deadline stresses the urgency to extend the Stamp Duty holiday or face a sizeable number of buyer’s losing out financially, many of whom might not have the spare funds available to complete their transaction, which could undermine proceedings for multiple parties in a chain as buyers are forced to withdraw or pull a gazunder to compensate for the additional levy.
An extension of the Stamp Duty holiday deadline as many have requested is the right course of action, but it does raise the question of how far to extend said deadline, and even then, it could simply become a case of kicking the can down the road as sales going through at a date closer to the extended deadline risk falling into the same trap.
Looking beyond a proposed extension of the SDLT deadline, perhaps now is the right time to reconsider reforming the Stamp Duty tax itself. Prospective buyers already face a more challenging market as high demand and supply bottlenecks have consistently fuelled annual increases to house prices, creating further financial burdens for savers. Average residential property prices increased 7.6% in the year to November 2020, according to the latest HPI data from the Office for National Statistics (ONS), up from 5.9% in October 2020, setting a new record high of £250,000 and presenting the highest annual growth rate in the UK since June 2016.
Indeed, while Stamp Duty has arguably made it harder still for first-time buyers purchasing a home over £300,000 to get on the ladder, it is particularly the case for existing homeowners looking to move. The other reveal in the latest ONS data that average house prices in London exceeded £500,000 for the first time in November would disqualify many buyers of any relief on the tax anyway, only adding to the financial pressures for new buyers in the capital after the Stamp Duty holiday expires. Of course, London is not the whole country, but it does reflect a growing issue that could spread throughout the UK as average house prices continue to increase.
Reducing the SDLT could make it easier for prospective buyers to raise a deposit and would likely enable a significant increase in transactions, just as has been achieved through the Stamp Duty holiday which resulted in a boom at the end of last year.
There would no doubt be some reluctance towards this move. Given the huge expenditure of COVID support measures, expected to reach a £210 billion total thus far according to the latest data from the National Audit Office, and the contraction of the overall economy (the national GDP fell 2.6% in November last year) threatening a double-dip recession due to the ensuing lockdown, it is understandable that the government will be keen to recoup as much tax as possible. The Stamp Duty levy raised almost £12 billion in 2019/20, with similar figures for prior years, and it would be a enticing target for when the Treasury looks to refill its coffers.
However, going by Housing Minster Robert Jenrick’s 14 January Tweet that the housing industry is vital to the recovery of the economy, perhaps actions can reflect words by taking the initiative to reform one of the UK’s most hated taxes.
This article was originally published on LinkedIn.