How Will The Stamp Duty Cut Affect House Prices?
The big question is whether cutting stamp duty (aka ‘Stamp Duty Land Tax’ or SDLT) for people buying homes will get the UK economy moving, as the government desperately hopes.
Either way, there are big savings in tax for purchasers. Rightmove have provided a useful online calculator so you can see ALL costs in moving home including stamp duty.
Rightmove and a number of newspapers are also reporting a ‘mini boom’ – based on “a 35% rise in the number of sales agreed in England”. When a sale is ‘agreed’ subject to contract (STC) it leaves room for either the buyer or seller to pull out for any reason until Exchange of Contracts usually 2 or 3 months later.
Nonetheless, estate agents are reporting big increases in activity. So this should at least prevent prices from sliding as seemed likely after the massive economic shock of lockdown, and may boost some house prices in the short term.
But this stimulus to demand is balanced by other factors holding back demand. More sellers are putting properties on the market increasing supply. Also mortgage lending is effectively being rationed by banks for anyone needing to borrow 90% Loan-To-Value. Rules are now stricter for the self-employed and anyone who has been furloughed. Without a large deposit many buyers may struggle to raise the necessary funding. So with ‘mortgages still in lockdown’ it will particularly affect first time buyers. And without first time buyers people ‘higher up the property chain’ will also be restricted.
Also, many first time buyers have gained little benefit from the Stamp Duty holiday as they already didn’t have to pay stamp duty on purchases of less expensive homes.
Even if prices do rise a little, when Stamp Duty is re-imposed (by 31st March 2021) it’s likely that the market will stall and any gains will shrivel in value. And with unemployment rocketing and the world economy in dire shape any ‘mini boom’ is likely to be a damp squib.
But at least surveyors doing mortgage valuations will now be less likely to ‘downvalue’ (which can cause Loan-To-Value problems with mortgages) because the market is much more positive.
Our next blog – coming soon …….
MOVING IN ON COMPLETION DAY
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