Even before the Chancellor announced the stamp duty holiday on Wednesday 8 July estate agents had seen unprecedented demand from people wanting to buy property. Certainly at Dixon Stewart June 2020 was a far busier month for new instructions than June 2019.
How does the stamp duty holiday work? The tax threshold has been temporarily raised until March next year to £500,000 in England and Northern Ireland. Anyone completing on the purchase of a main residence between 8 July and 31 March 2021 will not pay any stamp duty. More expensive properties will only be taxed on their value above that amount. Buyers will save as much as £15,000 if they are buying a property of £500,000 or more.
Clients who had already exchanged contracts on a house purchase with completion for 8 July onwards got an instant saving on money they had already paid to us. The Government hope that they will use this money in order to help boost the economy by purchasing something new for their home or carrying out improvements.
The stamp duty holiday is intended to boost a property market hit by lockdown and to help buyers who have taken a financial hit because of the coronavirus crisis. Buyers will be in a better positon to qualify for a mortgage as reduced stamp duty allows them to pay a larger deposit. Sellers are more likely to come to the market during this period when they believe buyers will have more money to spend.
There is a concern that while the stamp duty holiday may boost the property market in the short term it could also lead to a spike in sales that pushes up prices before the deadline followed by a slump next spring. This was observed in 2016 before the 3 per cent buy to let and second homes surcharge was introduced.
Extending the stamp duty holiday to help buy to let purchasers and second home purchasers was a surprise. Investors have in the past been hit by higher taxes. Before the stamp duty holiday they would have paid £30,000 in stamp duty on a £500,000 purchase. They will now pay £15,000.
First time buyers who were previously exempt from paying stamp duty up to £300,000 will lose their special status during the holiday paying the same rates as people moving home.
The Chancellor also promised that from September homeowners and landlords upgrading the energy efficiency of their homes would be able to apply for vouchers to cover at least two thirds of the costs of improving their properties up to a maximum of £5,000.
Finally nothing to do with house buying the Chancellor introduced the “eat out to help out” scheme. From Monday to Wednesday throughout August a 50% discount on food and non-alcoholic drinks to a maximum value of £10 per person will be available at restaurants, pubs and cafes who sign up to a new government website. If you decide to take advantage of this offer enjoy yourselves but keep safe.