Tapered end to stamp duty holiday could bring £28bn to economy

The economy could benefit from a £28bn injection if the government “tapered off” the Stamp Duty Land Tax (SDLT) holiday rather than sticking to a hard stop, research has suggested. 

Online mortgage broker, Trussle, and Legal & General Mortgage Club, have called for a tapering off of the holiday as an alternative and fairer way to bring the scheme to a close.

The stamp duty holiday is currently due to end on 31 March 2021 and figures estimate that as many as 105,000 property transactions could collapse if buyers are unable to complete before this deadline.

Using the average property price of £269,150 in the UK, the value of property transactions that are likely to fall through due to the holiday’s hard stop could be as high as £28bn. 

Amid rumours that Rishi Sunak will use his Budget next week to extend the stamp duty holiday by three months to the end of June, both Trussle and L&G have argued that any extension to the holiday should be targeted at helping people already underway with their property purchase, to avoid any additional issues of “cliff-edges” to the scheme.

Such a move could also prevent a situation where the Treasury would lose additional SDLT funds from the transactions that fall through as a result of missing the current deadline.

Trussle head of mortgages, Miles Robinson, commented: “There’s been some discussion about simply extending the SDLT holiday beyond its current deadline. However, this is unlikely to solve the problems posed by a hard stop to the scheme as we’d still find ourselves in a situation where thousands of homebuyers miss out and have to front the unexpected SDLT bill.
“There will be a significant number of current buyers who are dependent on the savings from the holiday to be able to afford their house purchases, and it’s likely that many will pull out if they are unable to complete in time to meet the 31 March deadline.”

Tapering the stamp duty holiday could also support medium term growth in the housing sector too, both L&G and Trussle argued, by supporting jobs at a time when thousands of workers have been furloughed and contractors laid off.
For consumers, a tapered ending to the holiday could also help protect homebuyers from unexpected financial strain, with the research indicating that a collapsed house purchase at a late stage costs an average £5,439.80 in estate agent fees, valuations, surveys and legal costs. 
“We would like to see a broader review of property taxes including SDLT to assess the different impacts on an evolving property market,” added Legal & General Mortgage Club director, Kevin Roberts.

“Until this happens, we would encourage the government to consider a tapering of the scheme in the upcoming Budget, this would help to avoid the potential for significant disruption in the housing market.

“A smooth transition would also support future growth in the housebuilding sector, which has the potential to turbocharge growth as part of the government’s recovery plans.”

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