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Will the Stamp Duty holiday extension revive the housing market?

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In January, houses prices in the UK suffered their biggest fall since April 2020, which raised concerns that the housing market was set to lose momentum ahead of the initial Stamp Duty holiday deadline of 31 March 2021.

According to national mortgage lender Halifax, UK house prices fell 0.3% on month in January to an average of £250,000. Prior to that fall, house prices grew for seven consecutive months dating back to May.

The lender also noted that the annual rate of house price inflation dropped to its lowest level since August, at 5.4%. This was in contrast to the annual high rate, which was 7.6% in November.

Why was the housing market losing momentum?

One of the main reasons for the momentum shift in January was attributed to fears that the Stamp Duty holiday was coming to an end.

Announced last year to provide a boost to the housing market during the height of the pandemic, the Stamp Duty holiday was initially set to be coming to an end on 31 March 2020.

Halifax suggested that, as the deadline was drawing near, anyone who sought to take advantage of the scheme was already nearing completion, contributing to slowing the overall market.

“There are some early signs that the upturn in the housing market could be running out of steam,” Russell Galley from Halifax said.

“The stamp duty holiday has undoubtedly helped to fuel growing demand among households for larger properties.

“However, given the current time to completion across the market, transactions in the early part of 2021 probably don’t include many borrowers who expect to benefit from the stamp duty reprieve.”

In response to the challenges facing the housing market, Chancellor Rishi Sunak announced on 3 March 2021 that Stamp Duty relief on purchases up to £500,000 will be extended to 30 June 2021. A ‘tapered’ extension is also in place, allowing relief on home up to £250,000 until the end of September 2021.

What effect will the Stamp Duty holiday extension have?

There have already been signs that the extension of the Stamp Duty deadline will help to revitalise the housing market. Following the slump in January, the anticipation of an extension helped to reverse the decline, leading a 0.7% increase in February.

Now that the Chancellor has given the extension the go-ahead, buyers who would have otherwise been caught in no-man’s land have a chance to reach completion and to avoid facing the ‘cliff-edge’ that the previous deadline presented.

It’s been reported that the extension could now save around 300,000 property transactions in England, which highlights the significance of the Chancellor’s decision.

The Stamp Duty holiday extension will also work in conjunction with other government-backed schemes, such as the mortgage guarantee scheme and the new Help to Buy: Equity Loan Scheme, to provide further assistance to anyone struggling to get on the property ladder.

However, there is a risk that the extension of the holiday is merely delaying the inevitable ‘cliff edge’ that any house buyer will eventually come face to face with. The government have taken steps to prevent this from happening with the introduction of the tapered extension, but the threat still lingers.

While a future beyond the Stamp Duty holiday may provide additional difficulties, there are signs that the housing market will be able to survive without it. Once lockdown procedures are a thing of the past, it’s thought that the shift in working patterns brought on by the pandemic are likely to sustain the housing market, as people begin to search for homes with outdoor space and home offices.

Get practical advice about Stamp Duty and moving home during lockdown

At Braddon and Snow, our residential conveyancing solicitors can work alongside you to help you complete your property transaction, providing advice and guidance in relation to the Stamp Duty holiday and current COVID-19 restrictions.

We understand how daunting moving home can be at the best of times. So, with the situation regarding Stamp Duty and the wider housing market changing all the time, our conveyancing team will take every possible step to make the process as straightforward as possible, keeping you updated at all times.

If you would like to speak to a member of our conveyancing team, please do not hesitate to get in touch: