In March 2021 the chancellor, Rishi Sunak, announced that he would be extending the stamp duty holiday as part of the government’s plan to turn ‘generation rent’ into ‘generation buy’.
The stamp duty holiday has the potential to save buyers thousands of pounds. However, those experienced in the industry – such as Sam Najafi, property writer – believe that it has the potential to make home ownership difficult for first-time buyers.
Stamp Duty Rates
Following the announcement made by the chancellor, the stamp duty holiday has been extended until the 30th of June in England and Northern Ireland. Under this arrangement, the first £500,000 of a property’s value will be tax free, which can save buyers up to £15,000.
After June, the stamp duty threshold will drop to £250,000 until the end of September, at which point it will return to its usual level of £125,000. There is a separate threshold for first-time buyers, currently set at £300,000, and this will come back in after the end of June. The first stamp duty threshold cut will impact first-time buyers who are looking to spend more than £300,000, and all other buyers.
Market Impact
Following the chancellor’s announcement, many potential buyers will have breathed a sigh of relief. The stamp duty holiday has created a buzz of activity, which means thousands more buyers are competing during every step of the buying process.
Social distancing has made viewings more complicated, and issues such as illness are delaying property transactions. Without the extension to the stamp duty holiday, it is likely that thousands of deals would have fallen through because they were not able to get across the line in time.
House Prices
The stamp duty holiday has already played a part in pushing up average house prices to a record high. In 2020, prices rose by 8.5% to an average house price of £252,000.
According to the Office for National Statistics, this is the highest annual growth rate since 2014. The extension to the stamp duty holiday is likely to push house prices higher still, with the Office for Budget Responsibility predicting a 5% increase in 2021.
First Time Buyers
First-time buyers already benefit from stamp duty relief on properties costing £300,000 or less. For some first-time buyers, the additional stamp duty holiday is proving beneficial in areas, such as London, where house prices tend to be higher than the first-time buyer threshold.