Category: News

Agents almost without exception have backed the two-phased extension to the stamp duty holiday and also the mortgage guarantee scheme under which buyers of properties up to £600,000 can purchase with as small as a five per cent deposit.

The only hesitation – reflected in some comments below – is the uncertainty as to whether the extended SDLT holiday merely moves the hated ‘cliff edge’ further into the distance, rather than ending the worry for good.

In case you missed them, details of the Budget are below, but first a selection of enthusiastic reactions from agents and suppliers.

Kevin Shaw, group managing director of residential sales at Leaders Romans Group: “In the past year [the holiday] has been a crucial boost for the UK economy, and the ongoing momentum will certainly help to increase public confidence in the post-Covid recovery. At the moment, the property market is set to be stronger than initial forecasts have suggested and we expect Q2 to perform well. The Stamp Duty Holiday extension will certainly help with this.”

Patrick McCutcheon, head of residential at Yorkshire’s Dacre, Son & Hartley: “First time buyers are the engine room that ensures the overall liquidity of the housing market and we very much welcome this move to provide mortgages to homebuyers who put forward a five per cent deposit. The 31st of March stamp duty deadline had the potential to deliver a cliff edge to transactions. The conveyancing profession have been working incredibly hard to ensure that home movers can achieve the saving, but the extension of the relief now takes some of that pressure off the system itself, but also the emotional pressure home buyers are currently experiencing within what is already a challenging environment.”

Jeremy Leaf, north London estate agent and a former RICS residential chairman: “The biggest test is does the Budget help maintain or even improve the number of transactions and investment without adding to upwards pressure on prices? And at the same time encourage the building of more new homes, particularly affordable ones? I have to say the Chancellor probably gets ‘B’ or ‘B-minus’ on his report card as the stamp duty extension, including the tapering, is welcome but there will be another mini cliff-edge in the autumn when this latest holiday finally comes to an end.

“In particular, the reduction in the Affordable Homes Programme, which is cutting the number of social rented homes, is of particular disappointment. The other regret is the lack of support for tenants, apart from those supported by the now extended furlough scheme.”

Bryan Mansell, co-founder of PropTech supplier Gazeal: “Although it’s positive to see the government listen to the views of agents and conveyancers on the coalface, as well as the property-buying public, more consideration should have been paid to calls for a more specific tapered end to the tax cut. A three-month extension – and additional help until September – will be more effective than an additional six weeks, which was previously rumoured to be in the Chancellor’s plans. However, it still creates a cliff-edge so even though more buyers will benefit from stamp duty savings than previously thought, there will still be some who miss out.”

Guy Gittins, chief executive of Chestertons, says: “Whether a three-month extension is enough remains to be seen. As we are witnessing the stamp duty holiday’s positive impact on the housing market, we believe there’s a strong case for the stamp duty tax system to be comprehensively reviewed; a thought that is likely to remain a hot topic over the next few months. Any additional assistance for first-time buyers is always welcome. First-time buyers were hit particularly hard by the lack of mortgage availability during the pandemic. As such, the government’s introduction of a 95 per cent loan to value mortgage presents good news for first-time buyers, keen to get on the property ladder. Another audience likely to benefit are existing home owners wanting to trade up or re-mortgage to release equity.”

Rightmove property expert Tim Bannister: “We’ve heard from so many first-time buyers over the past year of their challenges to raise a 15 or 20 per cent deposit, with a number saying they had to put their plans on hold, so the availability of five per cent deposits will really help this all-important market sector. It could help some buyers bring their plans forward, especially if they managed to save more than they were expecting to while in the various lockdowns. It’s also a helping hand to people who have been struggling to trade up because of the much bigger deposit needed. Right now there are not enough properties coming to market to satisfy the increased buyer demand that this scheme will likely bring.”

Iain McKenzie, chief executive of The Guild of Property Professionals, says: “The Chancellor gave the property market a double shot in the arm today, with a boost from the stamp duty holiday extension and 95 per cent mortgages. Extending the stamp duty holiday until the end of June, then phasing it out until September should help avoid a sudden downturn in prices caused by the much-feared cliff-edge end. With the zero-rated stamp duty limit extended to £250k until the end of September and the average UK house price being £252k, it means that thousands of people can benefit from this incentive – particularly first and second-time buyers.”

Craig Vile, director of The ValPal Network (a product of Angels Media, publisher of Estate Agent Today): “The stamp duty holiday extension is positive news … There are, however, some concerns. Firstly, if there is no tapered end, thousands of buyers could miss out on tax savings and there could be a drop-off in market activity. Secondly, there are concerns that the stamp duty holiday has artificially inflated property prices. Agents must therefore consider the impact another six months of stamp duty savings could have on average prices for the rest of the year.”

For those who missed Chancellor Rishi Sunak’s Budget yesterday, here are the main measures affecting the property industry.

The stamp duty holiday on properties up to £500,000 will be extended from March 31 to June 30; from July 1, the holiday will apply only on properties up to £250,000 until the end of September. It will not be until October 1 that the pre-Covid stamp duty thresholds and levels will resume.

This means that the maximum saving for buyers from the start of July until the end of September will be just £2,500 – sizeably less than the £15,000 saving possible under the current holiday, which continues until the end of June.

Chancellor Sunak has also confirmed that there will be government-guaranteed 95 per cent mortgage loans available from next month, on the purchase of properties up to the value of £600,000.

Sunak also says there will be a 100 per cent Business Rates Holiday until the end of June; thereafter business rates will be discounted by two thirds up to a maximum of £2m for larger businesses. However, Corporation Tax is to rise sharply from 2023.

“The latest estimates are that 70,000 to 100,000 home buyers will miss the March 31 deadline … This is obviously terrible news for those affected, but extending the holiday would simply mean delaying the pain to a different set of house movers in the future” warns Simon Nosworthy, a conveyancer at the firm Osbornes Law.

He continues: “Yes, a delay now would save all of those would-be house movers the stamp duty fee, but all that does is store up the problem for other people down the line.”

Nosworthy says that the holiday has so far meant that conveyancers like himself, and much of the agency industry, have never been busier – but he suggests you can have too much of a good thing.

“While this has undoubted boosted business and the economy generally, unless the Chancellor decides to abolish stamp duty forever – around as likely as the abolishment of income tax – then the holiday can’t go on indefinitely.”

He adds: “One major problem with the stamp duty holiday is that it has created an artificial bubble that has seen house prices rise by 8.5 per cent. This means that first time buyers have had to save more to come up with a deposit, when things were already difficult enough to get on the property ladder.

“In addition, there is a real risk that prices, having been artificially inflated, may well go down when the holiday ends. Those who bought during this period may find they have overpaid, potentially negating any saving they made from not paying stamp duty.”

Nosworthy says that some of those who would have been hit by failing to meet the March 31 deadline will obviously benefit from an extension, while more broadly the extension of the holiday increases the galvanising effect on the wider economy.

But he adds: “The stamp duty holiday has served its purpose well in that it has encouraged people into the housing market despite the uncertainty the pandemic has brought. But while there are clear benefits to extending the holiday the time has probably come to let it end and get back to a state of relative normality.”

Today’s Conveyancer says increasing numbers of conveyancers have taken to social media to talk about the pressure they are under.

One has been Molly James, conveyancer at Convey Law, who wrote on LinkedIn: “Quite shocked and disgusted that in these trying times for ALL conveyancers, there are still a small few that do not know how to stay professional and ‘be kind’ in their email replies. Polite reminder to those people, you do NOT know what that person on the other end of your snappy email is going through, be it work or home life. Your email could just be what tips them over the edge into feeling completely helpless. PLEASE be more mindful when you type your snappy emails. We are all in the same situation.”

Ryan Letts, director at The Priory Law Group, adds: “I had a conversation over Zoom today with someone who was juggling home schooling and handling some complex drafting with me. On a number of occasions she had to mute the conversation apologising each time. There was no need for the latter.

“One should step back, breathe and realise the cumbersome stress and unrest these stay at home instructions bring and help each other along the path to normality especially if that person provides an avenue to progress what it is that you are both trying to achieve for yourself or a client.”

This is almost two-thirds of the average first time buyer deposit and will have helped more than usual because of the stamp duty holiday operating since July 2020.

That £42,500 average masks a much larger figure in London – typically a huge £102,826 – while those in South East England gifted an average £61,500.

Below average sums were gifted in the North West (£23,467) and Yorkshire (£25,217).

The analysis, by Key equity release company, involved a study of over 1,000 older homeowners.

Key chief executive Will Hale says: “Finding almost £60,000 to use as a deposit for your first home is tough – especially in the current economic environment – and therefore it’s not surprising that many younger people have looked to take advantage of the stamp duty holiday.

“In 2020, older homeowners released almost £755 million of equity in order to help younger members of their family meet a range of costs including supporting them with an average of £42,500 to use for a house deposit.

“For many people, these gifts will have been the enabler to them buying their first home and is a perfect example of how intergenerational wealth transfer can deliver positive societal benefits.  The stamp duty holiday has certainly been a catalyst for more activity in this area but helping family is always a major motivation for older homeowners exploring their equity release options.”

Typically public support for such petitions fizzles out after a debate but in this case signatures continue to flood in.

It was not until January 15 that the petition – launched back in October – secured the landmark 100,000 signatures to trigger the debate in the House of Commons, which was held on February 1.

However, since January 15 there has been a 50 per cent rise in signatures, indicating an unusual continuing level of support for the petition.

In the debate an unexpectedly large number of Labour MPs, as well as many Conservatives, spoke in favour of an extension; the only opponent was the one Liberal Democrat who spoke.

The Financial Secretary to the Treasury, Jesse Norman, concluded the debate for the government and confirmed that Parliamentary convention prevented him from giving any firm indication on whether the Treasury would agree to an extension of some kind.

However, he raised eyebrows by saying the Treasury would consider ‘substantial performance’ as well as ‘completion’ when looking at how to handle stamp duty exemptions. That ‘substantial performance’ element refers to the many MPs who suggested a tapered end to the exemption, where buyers who had reached a certain stage of their transaction would still get the SDLT discount – even if completion had to be after March 31.

The Treasury’s own advice to its ministers and civil servant says that ‘substantial performance’ is acceptable as a legal term alongside completion. “A contract will be substantially performed where the purchaser obtains ‘the keys to the door’ and is entitled to occupy the property” the Treasury guidance says.

Next Wednesday’s Budget is expected to make clear the path the government will take on any extension to the holiday, currently scheduled to finish on March 31.

That’s the finding of a survey by Knight Frank, which asked 500 current purchasers their intentions.

To the question: Would you pull out of a purchase that wasn’t going to complete before March 31? some 12 per cent said Yes; 36 per cent No; and 52 per cent said they’d renegotiate the price.

The agent’s survey suggests there is overwhelming support for an extension to the stamp duty holiday.

Some 87 per cent of respondents say Chancellor Rishi Sunak should extend in the Budget next month, while a quarter of those who advocate an extension say it should be tapered.

Elsewhere in the study, 36 per cent of respondents say they are more likely to move in the next year as consequence of the latest lockdown, with 19 per cent less likely.

Just over a third of people think their house value will rise between one and five per cent in the next year.

A full 42 per cent say they will use virtual viewings more often even after the requirement to do so ends.

In terms of the much-hyped desire for more space, the survey appears to show that the latest lockdown has reinforced trends that emerged after the market reopened last May, with a desire for space, greenery and the ability to work from home remaining at the forefront of people’s minds.

The escape to the country trend doesn’t appear to have run its course either, with 38 per cent of respondents stating that the latest lockdown had made them more likely to move to a rural location.

Covid-related delays meant more than 16,000 sales were at risk, with buyers facing large bills if their purchases did not meet the late-March deadline.

The scheme allows first-time buyers to buy a home with a deposit of five per cent, has been extended for two months top allow buyers to complete on purchases that have been delayed by the pandemic.

Although the scheme is obviously unrelated to stamp duty, it shares the same deadline – and the debate goes on within the agency industry hoping for a stamp duty deadline extension as well.

Homes England, which presides over Help To Buy, says the latest extension – the third – will be the final one.

“It’s been confirmed that this will be the final extension of the scheme and advisers now have a key role to play in helping buyers to understand what these changes mean for them.”

“This measure provides certainty to developers to build out homes delayed and further protects customers whose purchases have been delayed by Covid-19” a spokesman for Homes England says.

Zoopla has undertaken a new analysis to measure the impact of the holiday as a whole, and to assess the housing market in the past year.

The portal says that when the holiday was announced in July many buyers already in the pipeline obviously benefitted.

It says the stamp duty liability from sales agreed in England after the first lockdown ended in May was £7.8 billion, not including the additional homes three per cent stamp duty surcharge.

For sales agreed between May and the end of the calendar year, some 600,000 escaped stamp duty – either because properties were exempt to begin with, or they were under the holiday’s £500,000 threshold.

In total these will each save an average £4,660 on stamp duty – providing they complete before March 31, of course.

The 140,500 sales agreed over £500,000 all saved £15,000 each – that £2.1 billion in total – but these sales would still be liable for £2.9 billion for the stamp duty levied on prices over £500,000. On top of that, there will be the three per cent surcharge for some properties.

Richard Donnell, insight and research director at Zoopla, says: “A surge in sales at higher house prices in 2020 would have created a major tax liability for UK home buyers but the stamp duty holiday looks set to deliver £5 billion in full or partial savings for 740,000 buyers over 2020 and the first quarter of 2021.

“Many will have already completed their sale or will be completing shortly but for some the risk of missing the deadline remains.”

Gerard Lyons was chief economic adviser to Johnson during his second term as the Mayor of London and played a leading role in the 2016 Referendum, co-founding Economists for Brexit.

Lyons – considered to be an expert on the UK and world economy, global financial markets and economic and monetary policy – is now a senior fellow at the Policy Exchange think tank.

He says: “The current stamp duty holiday should become permanent with stamp duty being abolished on lower valued properties.”

However, he is critical of the current stamp duty holiday which reaches a much-debated cliff edge finish on March 31.

“Temporary freezes in stamp duty are not a solution as they prompt a spurt in demand as people try to buy before the tax is raised again, pushing prices higher, out of the reach of many first time buyers” he writes in a new Policy Exchange document.

He continues: “More generally, as there is a need to improve turnover in the housing market, stamp duty on housing transactions is a bad tax. Ideally, stamp duty should be abolished, but as a first step it should cut to zero permanently on lower valued properties and reduced on higher valued properties.”

Lyons says as far back as the March 1988 Budget the then-Chancellor, Nigel Lawson, announced that multiple mortgage tax relief would be scrapped later that year, prompting a surge in house prices as people rushed to beat the deadline. Now the same is happening with the stamp duty holiday cliff edge, he says.

An even more fundamental issue, he says, is that houses are sold with stamp duty ‘paid on top’ – meaning buyers typically cannot borrow to pay the stamp duty, adding to the affordability problem of raising money to buy in the first place.

“There are often various schemes, particularly if a new build is being purchased, but generally speaking – and particularly if one is looking to buy a home that is not a new build – it exacerbates the financial challenges, particularly for first time buyers seeking to raise a deposit” says Lyons in his Policy Exchange report.

He notes that shifting the burden of stamp duty to the seller rather than the buyer might make it easier for borrowing, but would simply mean the cost was added to the asking price.

“If abolishing was seen as too radical, then another approach would be to lower stamp duty across the board and to cut it to zero permanently on lower valued properties, up to half a million pounds, or so. This would help first time buyers.

“This would imply that the present stamp duty holiday on lower valued properties should become permanent.

“There is a wider issue as to whether the current debate on stamp duty could, perhaps be the first stage in an overall review of property taxation.”

The independent market monitor Moneyfacts says overall mortgage availability rose in January this year for the fourth consecutive month, to 3,215 products – the highest since March 2020.

And since October the total product choice has increased by 42 per cent – that’s the largest four-monthly rise Moneyfacts has recorded since 2007.

The good news for those agents with buyers needing low-deposit loans, is that with 88 more deals on offer compared to last month, the 90 per cent Loan To Value category saw the largest monthly rise in availability of any category. At 248 products now available, this represents a huge 386 per cent growth in availability since October 2020.

“Further positivity for potential borrowers, regardless of the level of equity or deposit they have, may come from the fact that this improvement in choice has been recorded across the LTV tiers with the exception of 95 per cent LTV, where the five remaining deals are specialist products” explains Moneyfacts’ spokeswoman Eleanor Williams.

“Those with 10 per cent deposit or equity might be especially pleased to note that this tier has, for a second month, seen the largest uplift in availability. With products at this level often favoured by first-time buyers and traditionally being seen as higher risk for providers, willingness to extend lending in this risk bracket could be an indication that lenders have confidence in the sector, despite ongoing, wider economic uncertainty” Williams continues.

“After three months at a record low of 28 days, the shelf life for mortgage products has risen to 40 days, giving would-be borrowers a much better chance of securing their chosen deal before it is withdrawn” she adds.

“This, coupled with overall average rates remaining quite static and availability continuing to improve, could imply the mortgage market is now the most stable it has been since the onset of the pandemic last year.”

In detail, Moneyfacts says that the average two-year fixed rate for all LTVs rose for the seventh consecutive month, and the five-year equivalent rose for the second month running.

However, the rises were only 0.01 and 0.02 per cent respectively, and over the last two months, each of these averages has risen by just 0.04 per cent.

Moneyfacts says: “Considering that between September and October 2020 these rates increased by 0.14 and 0.13 per cent individually, this may indicate a levelling off and potential stability returning to the market.”