New data showing a boom in house prices and transactions during the coronavirus crisis has strengthened chancellor Rishi Sunak’s hand as he prepares to end the stamp duty holiday.
Mr Sunak introduced the tax break to provide an “immediate stimulus” to the economy last July. The Treasury said it intends to end the policy as planned on March 31.
The property industry has urged him to consider extending the exemption on the first £500,000 of residential property purchases, but Mr Sunak has told Tory MPs he needs to make “tough choices” to start restoring order to the public finances.
“The position is as laid out last July,” the Treasury said, referring to the announcement at the time that the temporary stimulus measure, which could save a buyer up to £15,000, would run to the end on March. Some in the Treasury fear that an extension of a few months would simply create another cliff edge.
This week new data reinforced the Treasury’s view that the policy had fuelled the property market and while it had helped protect jobs in the industry, it has also pushed the price of homes further out of reach of first time buyers.
New HM Revenue & Customs figures found that residential transactions were 31.5 per cent higher in December 2020 compared with December 2019 and were up 13.1 per cent from November 2020.
UK average house prices increased 7.6 per cent in the year to November 2020 — the highest rate since June 2016. The average house price is now £250,000 while in London prices passed £500,000 for the first time.
The Treasury said last month that stamp duty land tax raised “several billion pounds a year” that was needed to fund essential public services.
While Mr Sunak’s Budget on March 3 will focus on protecting jobs through what he hopes will be the final phase of the pandemic, the housing market looks less precarious than other parts of the economy.
The end of the stamp duty holiday would dismay estate agents and other property professionals. They have warned that ending the holiday in March would risk the collapse of thousands of deals yet to be completed, while an extension would also bring wider economic benefits.
Some agents have suggested the chancellor should at least consider an extension for those properties under offer.
“I think you can quite validly ask: why should we be faced by this cliff edge in the middle of a pandemic?,” said Tom Bill, head of UK residential research at estate agency Knight Frank.
“The sensible option now would be to taper the scheme, but that needs to be decided sooner rather than later,” Mr Bill said.
According to Rightmove, the housing portal, there are 100,000 property transactions that are already in train, but are unlikely to complete before March 31 and would miss the deadline to secure a stamp duty saving.
Many sales are moving slowly, as legal professionals and estate agents grapple with the logjam of deals that has built up as buyers rush to beat the end of the holiday.