This year’s stamp duty holiday for purchase up to £500k was introduced by the Chancellor to help invigorate the housing market after the first UK lockdown. It's been a great success and has actually caused a mini property boom. The issue currently is that it's time limited (currently until March 2021).
When Chancellor Rishi Sunak announced in July that no stamp duty would be payable on property purchases up to £500k, people who were not thinking about moving immediately decided to make a move sooner as it’s an offer that is too good to miss . Property investors who were on hold since the introduction of the additional 3% second property duty now had the chance to buy and only pay the 3% second property dut, without the stamp duty due on a standard purchase. People who wanted to transfer a property into another person’s name could now do this with up to £500k value duty free.
This has caused a massive movement in the property market, but not without issues. Some of these issues are listed below.
1) Properties being purchase with a mortgage are, in a lot of cases, being delayed due to an increased amount of applications going into lenders in such a short space of time. So queues to underwriters are forming with as much as 10 to 14 working days for a case to be even looked at for initial assessment. Then if the underwriter looks at the case but needs more information, back it goes into the queue for possibly another 10 to 14 days.
2) Properties bought with a mortgage - after the first lockdown lenders have severely toughened underwriting criteria, especially for all self employed people, and definitely for self employed (or employed for that matter) in the hospitality sector of the UK.
3) The increased hunger for property has increased prices immediately, and people are fighting over the same property in many circumstances. So savings on stamp duty are being eroded by increased demand, and people are not even considering this until it gets near to completion.
4) In the South-East, many councils are being swamped by requests for searches, Many councils are still operating with reduced staff numbers due to Covid 19 and searches are backing up to as long as 2 or 3 months in some councils. If the property is being bought with a mortgage, then waiting for a search is mandatory. At some stage, this will push some buyers past the stamp duty deadline.
So what happens if the purchase goes past the March 31st current deadline? Currently under the rules, even if the purchase started before this date, the normal stamp duty rates will apply. This has caused a lot of anxiety and calls for the holiday to be extended later into 2021. There are rumours that this could happen, and an announcement will be made early next year. So far ,however, they are only rumours, so please watch this space.
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