July 16, 2020
The announcement by Rishi Sunak last week of the new stamp duty thresholds has had clients whose completions are set to take place after the announcement rubbing their hands and planning how they are going to spend this unexpected windfall. There has been talk of “hot tubs” and post “Covid” luxury holidays being funded from the result of reduced stamp duty liability and whilst I’m sure that this will be welcomed by those areas of the economy, is this what the Chancellor had in mind when he made his announcement last week and are we just storing up trouble for the months ahead?
Wednesday’s announcement means that until March 31 2021 purchasers only start to pay SDLT on any part of the price paid for the property that is above £500,000. The rates apply regardless of whether it’s a first-time buyer or someone who has owned property previously. The current rates are:
£0.00 up to £500,000 on residential properties, the SDLT rate is 0%
£500,001 up to £925,000.00, the SDLT rate is 5%
£925,001 to £1.5million, the SDLT rate is 10%.
£1,500,001 and above the rate that applies is 12%.
Second homes, including buy to let purchases will continue to attract an additional surcharge of 3% over and above the standard rates but on a £250,000.00 purchase the new rates could mean an investor saving £2500.00. An investor looking to purchase between £250,000.00 and £500,000.00 will probably be one of the bigger winners of the new SDLT rates.
First time buyers, however, on the whole tend to start their property purchase adventures towards the cheaper end of the market and where SDLT savings will be more modest.
There will be first time buyers out there whose property purchase is within reach sooner rather than later. There will also be buyers who may be able to secure more advantageous borrowing because their “savings” are stretching further. Given the relatively short term period that the SDLT “holiday” will be around, will there be enough new entrants to market to take momentum beyond the end of March 2021?
History also shows us that in this country, where the economy has used “cliff edge” financial incentives to stimulate the property market that it can lead to a short term increase in property prices because of the increase in demand over supply with a softening of prices once the “cliff edge” has passed.
If new entrants are mainly investors with easier access to financing, will we see the opposite of what the Chancellor envisaged – First time Buyers being restricted from entering the market because of competition for properties?
In a post “Coronavirus” and “Brexit” world it is hard to see what the Chancellor might have done to provide sustained and ongoing stimulation to the Property market but we are seeing an increase in enquiries from both our private and investor clients which is positive.
If you are considering a property purchase please contact us on 0800 158 4147.