UK Chancellor Rishi Sunak announced a bold strategy to get the housing market moving again – a stamp duty holiday. Stamp duty thresholds are being raised to £500,000 until March 2021 to bring new life into the market following the drop caused by the coronavirus pandemic. What does it all mean for sellers and buyers, though? Let’s have a look at the pros and cons of the new move;
• Houses are More Affordable
The main benefit is the fact that houses are more affordable for first-time buyers. The average cost of buying a home in the UK is £248,000. A stamp duty threshold of £500,000 means that most people won’t have to pay any stamp duty at all and that saving is likely to incentivize them to buy a house.
• More Property Transactions
A significant benefit for sellers is that more properties will change hands across the next year. Property sellers will have an easier time selling their homes because more people can afford them and are willing to pay for them. More property transactions also mean that there will be more homes on the market, so now is an excellent time to become a seller.
• Now is the Time to Buy a Second Home
The stamp duty is for more than just first-time buyers. The stamp duty holiday means that second-time buyers will have an easier time sizing up and moving somewhere more expensive. Rightmove reports that they have seen 49% more inquiries on properties priced between £400,000 and £500,000, all of which could be sold without stamp duty now. If you’ve been waiting to move to a bigger home or a better location, then now is the time to do it.
• Savings for the Few
When you consider the original threshold for stamp duty, the exemption will apply for fewer people than expected. Most people were already buying and selling homes below the initial stamp duty threshold. First-time buyers, in particular, were finding cheaper homes. They may not be able to save as much as they expect.
• False Sense of Purchasing Power
Another drawback is that the stamp duty holiday gives people a false sense of purchasing power. People may feel that they can buy more house than they can afford right now. This isn’t good for both buyers and sellers. It is terrible for buyers because they could face financial problems in the future. For sellers, it isn’t good because it means they will have a harder time selling their property to someone who can actually afford it.
Is Now the Right Time to Move?
Experts warn against deciding to move just because of the stamp duty holiday. Make sure that you still think the move through and practice proper due diligence. You should always do some research on the property and make sure it is the right one for you.
Don’t wait too long, however. It takes an average of eight weeks to find a buyer for a home, and a further 15 weeks for the transaction to go through. Those who wait until the Autumn or Winter to buy a home could be left out as their sale may not process until after March 2021, when the holiday comes to an end.