Chancellor Rishi Sunak is expected to announce a ‘mini budget’ on Wednesday, in which he will propose a stamp duty holiday, similar to the proposal made by former Chancellor Phillip Hammond in 2017.
The move is expected to see the raising of the initial stamp duty threshold from £125,000 to as much as £500,000, in a ‘holiday’ designed to kick-start the UK economic recovery.
The Treasury’s current plans will affect England and Northern Ireland, who currently pay an average of 2% stamp duty on homes between £125,000 and £250,000, and an average of 5% on properties worth £250,000 to £925,000.
On properties worth £500,000, Peter Gettins of mortgage broker L&C Mortgages said first time buyers could expect to save up to £10,000 under the new scheme. Home movers buying property at the ONS’s average UK price of £248,000 can expect to save £2,460, while those buying a second property for the same price could expect to save £9,900.
The scheme is expected to be implemented in the Autumn, following the Coronavirus disruption which saw property prices fall for the first time in eight years. One issue that should be raised is that the stamp duty is normally most lenient towards those buying their first home, and thus the holiday will benefit them least. Today’s move, perhaps, should be seen as more of an effort to increase property market liquidity, than home ownership.
It serves the understandable purpose of encouraging economic activity, but by making it disproportionately easier for speculators to add to their portfolio, could actually make it more difficult for first time buyers to get on the ladder.
Speaking on the announcement, Managing Director of Ringley, Mary-Anne Bowring, said:
“A stamp duty holiday would no doubt cause a rush of transactions and help breathe life into a housing market that has been put into deep freeze in an effort to battle coronavirus.
“The government should be looking at long-term solutions as well as short-term sticking plasters when it comes to fixing the UK housing market.
“Millions of Brits were already renting, and that number was predicted to grow anyway with or without coronavirus. The disruption caused by coronavirus will likely see rental demand grow, as banks squeeze potential buyers with tighter lending restrictions and people put off buying or selling a home as it becomes clearer COVID-19 has caused continued uncertainty and disruption in the medium term.
“Eliminating additional stamp duty for buy-to-let investors would help stimulate the supply of rental homes while also driving wider activity in the housing market. Landlords are a crucial source of development finance through off-plan sales and will help support getting Britain building again.”