UK chancellor Rishi Sunak is under growing pressure to extend a stamp duty holiday, amid warnings delays in purchases could see hundreds of thousands of buyers miss out before the deadline.
New analysis highlights the strain on the property industry as it struggles to keep up with soaring demand since nationwide lockdown restrictions eased and the property tax was cut earlier this year.
Consumer intelligence firm TwentyCi Group said conveyancers, surveyors, mortgage firms, councils and moving firms may not be able to get many transactions agreed by January over the line by 31 March.
Stamp duty has been waived on the first £500,000 ($651,900) of a property’s value until that date in England and Northern Ireland, in a bid to boost employment in the property, home and DIY retail, construction and related industries. Scotland and Wales have similar but separate taxes set by devolved governments.
But research by TwentyCi this week suggests half of all sales completed between now and January will not by completed in time to benefit from the temporary tax break.
325,000 buyers with a sale agreed between September and January are likely to miss out and face much higher taxes if they proceed, according to the analysis.
WATCH: What do stamp duty cuts mean for buyers and prices now and in the future?
“Notwithstanding the political issue that this might cause with 325,000 disappointed people missing out on the stamp duty holiday, the real issue is the economic cost of the loss of these home moves,” said the research.
“A home mover is the most valuable consumer on the planet from the period running up to their move and carrying on for many months post the move as they settle into their new home.”
The agency expects many buyers to pull out of sales, which could jeopardise other sales in a chain. It estimates the UK would miss out on £4bn of economic activity as a result.
Jeremy Leaf, a former residential chairman of the Royal Institute of Chartered Surveyors (RICS), backed TwentyCi’s call to extend or tweak the tax break to limit the fallout.
The north London estate agent said on Tuesday: “The loss of so many transactions caused by the ending of the stamp duty holiday could have a devastating effect, not just on the property market but the wider economy.
‘Housing market sales have an enormous multiplier effect by supporting bricks, plumbers, electricians, roofers, decorators, gardeners, and so many other trades - to say nothing of the contribution to job and social mobility.”
“The chancellor could extend or taper the scheme to avoid a ‘cliff edge’ or perhaps more constructively leave the concession in place just for first-time buyers who are the lifeblood of the housing market. Either way, doing nothing is not an option.”
Economists had pointed out when the holiday was first announced that it risked distorting the market, creating a short-term spike and then sudden fall, followed by a period of subdued demand. Some expect prices to take a significant hit when the current temporary boom in demand fades and rising unemployment and mortgage rates spill over into the market.
But extending the stamp duty cuts would hit the Exchequer’s revenues, at a time when borrowing and debt has soared while tax receipts have tumbled. Labour has called the cuts a “huge bung” to second homeowners and landlords.
It comes as new figures from Halifax show a large part of Britain’s housing mini-boom since restrictions lifted earlier this year has been driven by demand for larger properties.
The cost of detached homes has increased by more than 5% since March, compared to 2.5% average increases for flats. Similarly, prices have increased more for buyers who are already homeowners, paying 4% more compared to an average 2.4% rise for first-time buyers who typically buy smaller properties.
A Treasury spokesperson said that the cut is helping to protect hundreds of thousands of jobs which rely on the property market, adding that the time-limited nature of the scheme is what has encouraged people
“The temporary stamp duty cut is helping to protect hundreds of thousands of jobs which rely on the property market by stimulating economic activity.
“Its time limited nature is what has encouraged people to take advantage of the scheme.”
WATCH: Stamp duty scrapped for homes under £500,000