We all know that the Government decision to implement the stamp duty land tax (SDLT) holiday had an unprecedented impact on the housing market, at a time when the housing market and the economy overall needed that all important boost.
At Open Property Group we like to take an objective look at the influences impacting the property market and over the last 8 months there has been no bigger stimulus than the stamp duty holiday.
The big question is will it be extended beyond its current closure date of the 31st March 2021?
Right now, opinion is very much divided.
House sales were undoubtedly starting to take a nosedive in the first lockdown, confidence was waning, and the market sorely need an injection of some description, hence the introduction of the stamp duty holiday on 8th July 2020.
The subsequent level of mortgage approvals soon reached pre 2008 financial crash levels with over 100,000 approved in October’20 alone.
The impact on the wider economy cannot be ignored either. Whilst house sales soared, so did prices, with growth of between 5% and nearly 8% according to recent surveys, and all in a period when the rest of the economy was struggling to keep pace. However, some of that growth may now be eroded with some regions reporting a slowing market and increased price reductions.
But what impact does this growth have and is it a reason for the holiday to be extended?
Many have argued that a strong housing market reflects a strong degree of market confidence and ultimately retail and related market spending. But is it really the case that consumer confidence has driven the surge in sales, or has it been driven by pent up demand and people wanting to trade properties and reassess their housing needs? Personally, I was desperate for some workout space after the shutdown of gyms, and many people needed home working space.
That is exceedingly difficult to assess but what is clear is that with mortgage advances are at a 10-year high and the impact on the wider marketplace is difficult for the Government to ignore.
Moving to a new house has a huge impact on many other businesses, like a stone thrown into a pool the ripples spread far and wide. The growth in conveyancing, mortgage broking and removal company business flows through into all aspects of home improvements, local tradesmen, and small companies, all who benefit from a buoyant market.
So, what does the Government do next? The holiday must come to an end at some stage but when is the right time?
The impact has been to boost local economies, driving retail and associated trades but, also creating a backlog that may force an extension, or some people will lose out due to the sheer volume of transactions clogging up the system.
Furthermore, the longer the indecision, the greater the risk of buyers withdrawing or seeking to re-negotiate their purchase price with the seller if there is any risk that they might miss the stamp duty holiday deadline.
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Inevitably the scheme will have to close at some stage and many interested parties continue to lobby for an extension, or as the ‘mood music’ may suggest, at least phasing out as opposed to just switched off.
Presently the Chancellor is standing by his guns and the Treasury is saying it will close on the 31st March, although there was a lot to be read from when he recently quoted that “he fully understands the frustrations of those who are, as we say, in the process of purchasing a property”.
So, whilst it seems sensible to keep in place a stimulus, we are also conscious that the increased activity in the housing market has put pressure on valuations and that could have a knock-on effect for investors, landlords and buyers moving up the property ladder.
Ultimately, it is not an easy decision, and the Chancellor is playing his cards very close to his chest. What is clear though is that despite the pressure on the Government to extend the holiday, no announcement has yet been made until the next budget on 3rd March.
Some say you can’t go on holiday for ever. We will keep you posted and give our views whether we stay on holiday or not!
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