Are we Likely to get a Stamp Duty Holiday?

UK Housing Market

UPDATE JULY 2020: A temporary stamp duty holiday has been confirmed on the first £500,000 of property sales across the UK, the changes coming into force with immediate effect, lasting until March 2021.

Whilst the Government clearly have a lot to consider right now, some property investors are feeling forgotten. Could a Stamp Duty Holiday support investors?

When Rishi Sunak, chancellor, delivered his much anticipated 2020 Spring Budget statement, it was clear that the Government had given the property market some much needed attention, but due to the outbreak of COVID-19, many promises made by Boris Johnson previously were not acknowledged.

Whilst the budget did include changes that were relevant to the property market, this being the changes to Stamp Duty Land Tax (SDLT) and investment in infrastructure, the main focus was on how the Government would tackle the public and private sectors to try and mitigate the effects of the virus.

This tied in with interest rates being dropped twice to a record low of 0.1 percent, reflecting the Bank of England’s attempt to encourage spending to keep the economy afloat. In addition, the Government addressed the needs of businesses and consumers by providing relief packages. Included in these packages were loan schemes for SMEs, large company tax relief and support grant funds.

There is support for those in the property market. Homeowners, including buy-to-let landlords are entitled to a three-month mortgage payment holiday. This has proved to be a relief to homeowners, with nearly 1.3 million property owners taking up this offer.

It is worth noting that this money is not deductible off of the total and will still be liable for the interest. It is not free money, more of a ‘pause’ until you can continue to pay, with an extension on the three months likely to those that need it.

Should the Government do more?

This answer to this question will surely be subjective to the individual’s circumstances. Regardless of political standing, the Governments approach to supporting individuals through this current challenge is admirable.

There are, however, some additional measures that could be implemented to different sectors of the economy which, of course, will need to be reasonable. Ensuring the finite funding is distributed fairly to consumers, investors and businesses remains a priority.

With the lockdown confirmed as extending for a further three weeks, questions are arising whether the property market should receive some further assistance.

The property market is the bedrock of the UK economy. Being significantly affected by the closure of construction sites and new property transactions being discouraged by the lockdown rules, the market is facing some major challenges.

The FCA guidelines published in March stated the three-month mortgage payment holiday could be extended, depending on the length of the lockdown. However, with interest accrued on their mortgage over this period, the extension, although welcome is not exactly advantageous to property owners with additional interest paid over the course of this period.

Will there be a Stamp Duty Holiday?

Another relief measure that many in the property market have asked for is a Stamp Duty Holiday once the lockdown in the UK has been lifted. With house prices very likely to fall over the coming 12 months, this being a result of decreased activity and confidence in the market, industry bodies are being asked to target measures to increase property investment.

Most would agree this is a reasonable ask. By removing this tax for a fixed amount of time and implementing, not indefinitely, buyers should be encouraged into property transactions during this period, boosting house sales and subsequently keeping house prices at a higher, healthy level.

This will need to be carefully implemented if it is to be applied. As an example, the buyer of the property should only be paying SDLT once the transaction has been completed, which can often take months. A broader question over whether the relief should be available to everyone or certain types of buyer will need consideration.

Will the market recover?

Those in support of a Stamp Duty Holiday are concerned that the level of interest witnessed at the start of the year will not be met once the lockdown has lifted. Whilst this is true to some extent, those thinking optimistically will see interest return after the COVID-19 shock.

Whilst the temporary lifting should encourage buyers, a more necessary approach much like we will see in many sectors, is a careful review of the sector with significant reforms being introduced at the Autumn 2020 Budget. This will provide those in the property market, particularly investors, the opportunity to realise changes that perhaps should have been introduced irrespective of the lockdown.

Currently, the Government has implemented changes needed to support those in the property market overcome the immediate hurdles faced by the COVID-19 lockdown, and this should be credited. Should we see the lockdown continue over additional months or restrictions remain unfavourable to the property market, the Government will need to do more and revisit relief schemes to continue to support the sector.