Fri 01 May 2020
Voices from across the property industry are calling for a stamp duty holiday to resurrect a market left at death’s door by the coronavirus outbreak.
The call for government stimulus to kick-start home buying once lockdown is lifted comes as stay-at-home restrictions have brought the property market to a standstill.
Estate agent Knight Frank warned that more than half a million home sales would be “lost” as a result of the crisis, while property website Rightmove suspended its monthly house price index for the first time in the report’s history due to a dearth of homes being put up for sale.
Looking beyond lockdown, Rightmove’s Miles Shipside flagged up the need for a financial incentive for first-time buyers, home movers and downsizers to unclog the property market in what will be a period of immense financial uncertainty.
He said: “Owners need to be encouraged to move by reducing the costs of moving, and prospective buyers encouraged to buy by reducing the costs of funding their purchase.”
The Royal Institution of Chartered Surveyors also reported almost universal pessimism from members looking at the next three months, with a majority gloomy about the outlook for the coming year.
As a result, the industry body is one of many calling for government intervention in the form of a stamp duty holiday to get the market moving again.
Hew Edgar, RICS head of government relations, said: “RICS is not an organisation that would call for a stamp duty holiday on a whim, and indeed our view prior to Covid-19 was that it required a full-scale review.
“As we start to emerge from this crisis, however, it is likely that the finances of potential home buyers will be under strain, and the burden of stamp duty could put buyers off. For those who can afford to move, they may lack confidence in the market, adding to the slowdown.
“A stamp duty holiday could be one of the ways to reactivate the housing market quickly as a short-term measure.”
A 12-month stamp duty holiday was announced as part of a package of measures to boost the housing market after the 2008 financial crash. And a stamp duty holiday doubled the number of home sales during the 1992 downturn.
Would a stamp duty holiday really help buyers?
As the rules currently stand, a buyer must pay stamp duty on property costing more than £125,000 on a progressive scale, up to 12 per cent of the portion of a property purchase above £1.5 million.
There is a three per cent surcharge for anyone buying a second home, while another additional three per cent charge is due to be introduced for overseas buyers next April.
The average home in England costs £247,000, meaning it will incur a stamp duty bill of £2,447. First-time buyers pay no stamp duty up to £300,000.
Stamp duty has been a lucrative tax for the Government, netting £8.4 billion in revenue for residential sales in 2018/19. However, Knight Frank warned that the Government stands to lose £4.4 billion in stamp duty receipts as a result of Covid-19 putting a stop to home sales.
The estate agent is calling for a stamp duty holiday as part of a package of measures, which could include an extension of the Help to Buy scheme and staggering of section 106 requirements to ease cash flow for builders.
Liam Bailey, Knight Frank’s global head of research said: “Despite the fact the Government will forgo a significant amount of stamp duty revenue in 2020, it seems clear there will need to be a stamp duty holiday to actually get the market moving once the lockdown is lifted.
“But this move alone will not be enough – there will need to be moves across a wider number of areas including an extension to Help to Buy to support first-time buyers and support activity across all price bands.”