News of the temporary suspension of SDLT for property transactions up to £500,000 caused a tsunami of comment; most of it positive but some with words of caution.
In the first half hour after the announcement traffic to Rightmove jumped by 22%.
Rightmove’s property expert Miles Shipside:
“This move will help to keep the nation and wider economy moving because keeping the current momentum going will help prevent destabilising falls in property prices as unemployment grows, and enable a quicker economic recovery. Lockdown prevented 175,000 would be sellers from coming to market so we hope this Stamp Duty holiday will provide the spur for those missing movers to come to market.
“They will find there’s currently record demand for their properties from prospective buyers, with Rightmove enquiries to agents now double what they were before lockdown. Home-movers will be grateful that the changes come into effect straight away so they don’t have to delay their plans, and what we could see now is people rushing to get a price agreed before some sellers put their prices up in the hope people will be able to pay more because of the tax savings.”
Vikki Bennett, spokesperson for property website OnTheMarket:
“The Chancellor’s bold move is bound to boost property transactions up and down the country. We welcome today’s step as a practical means of helping to sustain this post-lockdown bounceback and extend it for a longer period.
“As well as supporting first time buyers, and indeed buyers and vendors generally, these Stamp Duty savings will in turn generate revenue for all kinds of businesses who rely on a buoyant and fluid housing market.”
Patrick Cannon, a taxation barrister:
“If anyone remembers Norman Lamont’s ‘stamp duty holiday’ for eight months in 1992, they’ll recall that he raised the stamp duty threshold from £30k to £250k to get the house market moving in a time of recession. Sound familiar? It had a negative impact, because vendors raised their asking prices by roughly the same amount as the tax saving. It therefore worked out as a subsidy to sellers, at the cost of the taxpayer. Also, when the holiday ended, prices fell to reflect the re-imposition of the tax. Buyers who had bought at the higher prices then got burned as values fell with some put in to negative equity.
“An FOI request to HM Treasury found that Mr Lamont’s holiday eventually forced a collapse in the number of transactions, and prices fell sharply. The announcement of this fall in house prices further discouraged potential buyers. The stamp duty holiday, which had been intended to bring forward a recovery in the housing market, ended up further undermining the confidence that was essential to recovery.
“When the government reintroduced stamp duty, the holiday had cost £400m. Shortly afterwards, the pound tumbled out of the exchange rate mechanism on Black Wednesday. My warning to Rishi is ‘tread carefully’, because a stamp duty change will not benefit first time buyers, and it could have repercussions for years to come.”