The impact of the stamp duty holiday

Are you tempted to get your skates on and buy a property while there is a stamp duty holiday? Will people be able to afford to rent when they’re no longer furloughed and if unemployment increases? What will property prices do in future? Is the stamp duty holiday creating a bubble that is going to burst?

The concession covers homes worth up to half a million pounds and it seems to be doing what Chancellor Rishi Sunak hoped in kickstarting the post-lockdown housing market.

But is it also helping to push up prices? Both Nationwide and Halifax have reported a rise of 1.7% for July.

In a wide-ranging interview on BBC Radio 4, Richard Donnell, Research Director at the online property portal Zoopla and Jeni Browne, mortgage director at Mortgages for Business, spoke to ‘You and Yours’ presenter Winifred Robinson regarding how the tax cut is influencing investor and landlord demand.

Sweet spot

Zoopla has recorded a surge in demand in London and the South East of England where the most homes are in the ‘sweet spot’ of where the savings are greatest - between £400-600k. The two weeks immediately after the budget saw demand rise by 27% in London and not just from homeowners but from investors.

A stamp duty surcharge was introduced in 2016 for second home owners and buy-to-let landlords. They also benefit from the stamp duty holiday though the surcharge still applies. The surcharge was levied because the feeling was that that investors and second home owners were pushing first time buyers out of the market.

Paula Higgins at Home Owner’s Alliance thinks that situation will recur. “First time buyers will have increased competition because often they’re looking for similar properties.

Richard Donnell: “It’s important to acknowledge by how much the number of investment buyers has fallen over the last five years due to extra stamp duties and mortgage tax relief changes. In the south of England, the number of investors with a buy-to-let mortgages fell by 60-70% between 2015 and 2018. Less so in other parts of England where the yields were higher and so the impact was less.

First time buyers are still the largest group but they’re facing a lack of availability of high loan-to-value mortgages. I think their biggest challenge remains deposit levels and the ability to secure a mortgage.”

Should first time buyers be worried that the stamp duty holiday will squeeze them out of the market?

Jeni Browne: “I don’t think so. We are seeing a notable interest in buy-to-let for investors currently but landlords aren’t necessarily going to jump on the bandwagon. It’s a business decision and the numbers have to make sense. The stamp duty holiday is an incentive but the numbers, the yield and the associated costs must represent a solid investment.

If you bought now and the prices dropped in 2021, you’d be a bit gutted, wouldn’t you?

Richard Donnell: “The average homeowner stays in their home for 20 years and for a first-time buyer this is 10-12 years. We’re moving less often now so near-term house prices are not the overriding factor.”

Listen to the full interview on BBC Sounds. Skip to 7.45 mins.

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