Why house buyers are running out of time to take advantage of the tax break

There are now less than three months until temporary reduced rates on the Stamp Duty Land Tax (SDLT) end.

Under the scheme, if you purchase a property and it completes by 31 March, you only have to pay tax on the amount over £500,000.

The tax break has helped to drive a boom in property prices, but what lies in store as we come closer to the deadline?

Beware of bottlenecks

Every part of the industry is now reporting high demand, which might throw up roadblock. Bank of England data this week showed that the number of mortgage approvals made to home buyers was at a 13-year high in November.

Online mortgage broker Trussle reported a 48 per cent increase in mortgage submissions between May and November 2020 compared to a year earlier. According to the company, the average time it takes to approve a mortgage stands at 19 days as of December 2020, an increase of 111 per cent compared to the time it took in January 2020.

Conor Murphy, chief executive of Smartr365, which makes software for mortgage advisers, says: “These bottlenecks were initially caused by the release of pent-up demand following the first lockdown, however they became exacerbated as demand surged following the announcement of the stamp duty holiday. As the mortgage industry reacted to working from home, outdated systems struggled to keep up with remote work causing backlogs at each stage of a mortgage application.”

The price isn’t always right

The property market has boomed in the past few months. In December, prices were up 7.3 per cent on a year earlier, according to Nationwide – that’s the biggest increase in six years.

For many people, this means the potential gain of a tax break is likely outweighed by the higher cost. Should buyers steer clear of an inflated market?

“If they are buying as an investment, then house buyers should consider steering clear now that house price growth has outstripped the available savings,” says William Marriot, partner at law firm Charles Russell Speechlys. “However, a large proportion of buyers are moving out of necessity (schools, death, divorce and a need for home-working space). I always try to espouse a longer term view and there is rarely any other time than the present.”

Around one in six (15 per cent) house sales agreed in November went to landlords the highest proportion since December 2016, according to an index. (Photo: PA)

Is it too late to get started?

“Most estate agents and solicitors have been managing buyers’ expectations for at least a month now,” says Jonathan Hopper, chief executive of buying agents Garrington Property Finders.

“The blunt truth is that if you haven’t already started the buying process, your chances of completing before the March stamp duty deadline are sagging faster than most people’s Christmas trees.

“If you’re planning to move in the coming months, do your sums based on the assumption that you won’t complete before 31 March,” he advises. “If you get a lucky break and your transaction goes through before then, the saving will be a bonus.”

James Smith of Huddersfield’s Holden Smith law firm agrees. “If no extension to the stamp duty holiday is announced, I would suggest that the time may have now passed for buyers to take advantage of it.”

He says there will be exceptions such as chain-free or vacant properties, but the process may still be “very tight and quite stressful.”

Developers of new homes are encouraging those considering buying to opt for a new build in order to avoid a chain and increase chances of completing by the deadline. Sean Ruane, sales director at Joseph Homes, says: “For those prepared to act quickly, there may still be time to benefit from the SDLT holiday by taking this route, so we urge buyers to not be discouraged.”

If you want to make a go of it, Brian Murphy, head of lending at Mortgage Advice Bureau, suggests getting organised. “To give yourself the best chance, customers should have all the necessary paperwork such as ID, bank statements and proof of employment ready before engaging with a mortgage adviser. You cannot afford to rest on your laurels.”

Will the market crash?

Mr Hopper suggests that the fast approach of the deadline is not taking any steam out of the market.
“Thousands of people are still looking to move, but they’re doing so because they’ve concluded their current home no longer works for them, not because they’re hoping to save a few thousand pounds on stamp duty.”

Miles Robinson, head of mortgages at Trussle, says: “There have been predictions that house prices are likely to fall in the UK following the end of the stamp duty holiday. However, with fears of a no-deal Brexit subsided, pent up demand could return and those waiting for a potential ‘slump in house prices’ might be waiting longer than expected.”

George Franks, co-founder of London estate agents Radstock Property, said: “Even if the savings generated by the stamp duty holiday have been erased by rising prices, a growing number of people are wary that the mass vaccination roll-out could prevent prices from falling during 2021 and so are buying anyway.”

‘The tax break and cancelled holidays meant we could get a bigger home’

The Coventry family in their Leicestershire home (Photo: Crest Nicholson)

Hannah, 38, and Anthony Coventry, 40, moved to a new four-bedroom home at Crest Nicholson’s Kegworth Gate development in Leicestershire

Hannah, her husband Anthony and their two children Daisy, five, and Alfred, one, say not having to pay stamp duty meant they were able to opt for a larger house.

“We had decided we needed a bigger home with more space for Daisy and Alfie to play in, but we hadn’t anticipated being able to move so quickly,” says Hannah.

“With three holidays cancelled – including a trip to Ibiza for Anthony’s 40th birthday – we were able to put this money towards our new home.”

The family already knew the area, having lived in Kegworth for six years, but are now looking forward to making use of their extra space.

“We both love boxing so Anthony has a plan to convert our garage into a gym for us to workout. The kids have started to enjoy hitting punchbags as well so we’re looking forward to spending some family time together getting fit, “ she adds. “I also want to turn the spare room into a dressing room so I’ve got somewhere to keep my clothes and get ready, but I think the gym is the priority at the moment.”

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