If we cast our minds back to the end of March (which seems like a different lifetime ago, let alone only three and a half months), the property market was essentially put into “cold storage” as the most stringent elements of lockdown took effect. Removals became impossible and progressing transactions essentially went into hibernation. The usual “Spring bounce” in the property market was gone. Residential property lawyers were furloughed or made redundant and commercial property lawyers were negotiating rent breaks. According to government data, the number of residential transactions in May 2020 was 49.6% lower than the same time last year; house prices have dropped for the first time in 8 years.
But now, as buyers start to peek onto Rightmove and into the windows of local estate agents, the Chancellor has announced a temporary change to Stamp Duty Land Tax (SDLT) by raising the threshold to £500,000.00 to continue until 31 March 2021.
What this means for buyers
Mr Sunak’s figures suggest that this will save buyers £4,500 on average and 9 out of 10 main homeowners will pay nothing. Rightmove has estimated that for homeowners in London and the South East, this could result in a saving of £12,000–15,000 per transaction.
Thankfully the changes will take effect immediately; waiting until the Autumn statement with the hint of a holiday to come would only have caused buyers to have waited until then and further stagnated the property market over the summer.
For an owner-occupier buyer at £499,000, the tax will now be zero – a saving of £14,950 from yesterday. For an owner-occupier buyer at £600,000, the tax will now be £5,000 instead of £20,000 yesterday. For an investment buyer, these figures will drop to £14,970 from £29,920 and to £23,000 from £38,000. For those who were considering moving, these figures could be quite the “dangling carrot”.
Whether we will now find a “dead spot” in terms of property prices, with a sudden increase in properties sold for £499,995 and thereafter none until the £530,000s (as we once saw with the £250,000 jump to 3%).
The future of the property market
We’ve all heard a lot about “the new normal” but to quote Queen, “the show must go on” and a lot of the main instigators for moving home remain – people are still having babies, moving for school catchment areas, divorcing and downsizing. Estate agents have adapted to online property viewings and socially distanced physical viewings; in London, Chesterons reported a 127% increase in offers on properties from May to June. Our experience is that interesting or unusual properties are attracting a huge amount of attention; bidding wars and sale prices above asking price have all crossed my desk in the last week.
Many people now just want to get on with their lives, and perhaps Mr Sunak’s announcement will be enough to incentivise people to do just that.
If you have any questions relating to Stamp Duty Land Tax or your property purchase, please get in touch with Kate Hathaway using the below details.