When UK Chancellor Rishi Sunak announced a stamp duty holiday until next April the move was broadly welcomed. Liz Booth analyses the opportunities but also the possible pitfalls
Financial advisers’ clients often mull over the pros and cons of buying property – is it the right time to snap up a bargain; will the returns give them what they want in the right timeframe; and what are the risks?
Those are just some of the questions, particularly for first-time investors. So, what does the latest stamp duty
cut mean?
Some property experts have estimated it means nearly nine out of 10 transactions will no longer be subject to stamp duty and the average stamp duty bill will fall by £4,500. And in London and the southeast, home to more expensive properties, buyers could save up to £14,999 overnight.
Property company Zoopla said: “Our calculations in April showed that housing transactions could be down by 50% this year.” It therefore welcomes any incentive but points to the use of the word ‘holiday’, which gives would-be buyers an impetus to act now because it’s not a permanent change.
However, property expert Phil Spencer has warned of concerns about what will happen at the end of the stamp duty holiday period, in March next year, warning it will be a “cliff edge” and predicting a huge drop in the market as soon as the deadline hits.
And Martin Lewis, of MoneySavingExpert, said the current mortgage freeze means that many first-time buyers will have to stump up much bigger deposits. On top of that, there is the looming recession and ongoing uncertainty over house prices, he said.
“The housing market faces a period of real uncertainty and [the Chancellor] wants to get it moving,” said Mr Lewis. “The fact he feels intervention is needed raises a point of caution in itself. Plus of course, as the stamp duty rise is temporary, it could cause a demand bubble.”
Mr Lewis warned house buyers: “Ensure the financials are sound, don’t overstretch yourself, pick a budget and stick to it. Buy a home you’d be happy to stay in for longer, as that’s the best insurance possible.”
Perhaps a good moment for house buyers to call on professional financial advice.
The time is now
But what are professional investors saying? Property investment house RW Invest is bullish, suggesting: “If you’re a first-time buyer in the UK property investment market, or even considering building your portfolio without investing money in the stock market, the time to start investing in UK property is now.”
There is a lot of evidence to suggest that right now is the best time to buy property for investment purposes, it claimed, stressing: “While past statistics have shown that property prices tend to drop following rocky periods, this period of low growth is often shortlived. The property market has shown time and time again how resilient it can be and many savvy investors are taking advantage of recent economic changes that can help them get the most out of their investment.”
The company added: “While the stock market saw a turn for the worst in March, the property market has opened up new opportunities for investors wondering what to invest in now in the UK. A lot of investors who had tied up money in the stock market are instead choosing to purchase buy-to-let property and reaping the benefits.”
Liz Booth is contributing editor to the PFP
Image credit | Ikon
The changes:
Residential rates on purchases from 8 July 2020 to 31 March 2021
If you purchase a residential property between 8 July 2020 to 31 March 2021, you only start to pay stamp duty land tax (SDLT) on the amount that you pay for the property above £500,000. These rates apply whether you are buying your first home or have owned property before:
Property or lease premium or transfer value
Up to £500,000
The next £425,000 (the portion from £500,001 to £925,000)
The next £575,000 (the portion from £925,001 to £1.5m)
The remaining amount (the portion above £1.5m)
SDLT rate
Zero
5%
10%
12%
From 8 July 2020 to 31 March 2021, the special rules for first-time buyers are replaced by the reduced rates set out above.
Higher rates for additional properties
The 3% higher rate for purchases of additional dwellings applies on top of revised standard rates above for the period from 8 July 2020 to 31 March 2021:
Property or lease premium or transfer value
Up to £500,000
The next £425,000 (the portion from £500,001 to £925,000) The next £575,000 (the portion from £925,001 to £1.5m)
The remaining amount (the portion above £1.5m)
New leasehold sales and transfers
SDLT rate
3%
8%
13%
15%
The nil rate band, which applies to the ‘net present value’ of any rents payable for residential property, is also increased to £500,000 from 8 July 2020 until 31 March 2021:
Net present value of any rent
Up to £500,000
Over £500,000
SDLT rate
Zero
1%
Companies as well as individuals buying residential property worth less than £500,000 will benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.
On the 1 April 2021, the reduced rates shown will revert to the rates of SDLT that were in place prior to 8 July 2020.
Source: gov.uk
