The new stamp duty holiday could help boost the U.K. housing market
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Stamp duty payments in England and North Ireland have been cut, Rishi Sunak announced today.
The U.K. chancellor has increased the threshold at which buyers are required to pay stamp duty from $157,000 to $629,000. The level has been raised to help the U.K. housing market recover from the Covid-19 lockdown.
The change means that homes worth up to $629,000 are exempt from stamp duty and reduced costs for those buying more expensive homes. The scheme runs from today until March 31 next year and applies to buyers purchasing first and second homes.
In his speech in the House of Commons today, Sunak said that the tax holiday means that the average stamp duty bill for buyers in England and Northern Ireland will fall by $5,600.
Sunak’s announcement to temporarily cut stamp duty was part of his summer statement or mini-budget in which he set out a package of schemes designed to revive the U.K. economy after lockdown.
Homebuyers in England and Northern Ireland pay stamp duty as a lump sum when they purchase a property over a certain price. It is charged on a sliding scale from 2% to 12%.
Before today, homebuyers in England and Northern Ireland had to pay stamp duty on properties priced over $157,000. First-time homebuyers did not need to pay stamp duty unless the property they were buying was more than $377,500.
Richard Donnell, research and insight director at property portal Zoopla, comments, “the immediate increase in the stamp duty threshold will help sustain the rebound in housing market activity across England. The benefits will be immediate; nine of ten transactions in England will no longer be subject to the tax and in London and the South East, home to more expensive properties, homebuyers can save up to $18,800 overnight.”
He adds, “the government will expect the change to stimulate more housing sales over the second half of the year and that savings made by buyers will be reinvested in home improvements, white goods and furniture, rather than bidding up the cost of housing.”
However, Tim Walford-Fitzgerald, private client partner at accountancy firm HW Fisher says, “the success of the stamp duty tax cut will be determined by whether the Chancellor has got two things right–the target and the timing. The economy is uncertain and this reduction won’t necessarily be enough to spark the confidence needed to take on long term liability of a house purchase.”
“There is more to consider–mortgage availability, rising house prices, economic growth and overall market confidence are critical factors and the Chancellor should not forget that,” he says.
Tim Hyatt, head of residential at Knight Frank estate agency, adds that “in order for a fully functioning market to return, the availability of higher loan to value mortgages must also be improved to support first time buyers across the country.”