Last week’s announcement of a holiday for stamp duty land tax (SDLT) on properties seems an obvious fillip for the housing market. Implemented as part of Chancellor Rishi Sunak’s summer statement, the tax break means that until 31st March 2020 anyone buying a home will only be required to pay SDLT if the value of the property exceeds £500,000. So far, so positive, but will the cut will have any long-term impact on the market. Is it anything more than a sticking plaster on a wounded economy? Starting off with some optimism; any extra stimulus of the market is welcome, particularly after the cryogenic freeze Covid-19 applied to it.
What’s more, so far it’s worked. Rightmove has reported traffic to its listings increased by 22% immediately in the wake of the chancellor’s announcement of the £3.8bn tax. The property website said it received 8.5m visits, the highest in its 20-year existence. The number of people phoning and emailing estate agents via the site also hit a record high and was up 93% on the same day in 2019.
The announcement met with similarly spectacular results across the whole industry, with everyone from comparison site Zoopla to estate agents Winkworth reporting a dramatic uptick in interest.
All of this points towards a short-term boost for the housing market. Add to this that positivity was rife in the market before the SDLT announcement, and the short-term forecast for property looks decidedly sunny.
However, as always, there are some potential drawbacks to the scheme. The first is a question of fairness. While the SDLT cut is a welcome relief for the industry, it seems highly unfair that those who purchased property since the start of lockdown proceedings in March – at the urging of the government – aren’t subject to the same benefits. Do those people who risked infection and financial uncertainty while making their contribution to the health of the market not also deserve a break?
Of course, any scheme like this needs to be time-limited, but how hard or costly would it be to backdate the tax break – as many conveyancers are calling for – to the beginning of the lockdown period?
The second major drawback is the scheme’s focus. We shouldn’t ask too much of a tax break, it’s not designed to be a root-and-brach overhaul of housing policy, but it is worth asking who is this for?
The policy does little to address the housing market’s fundamental problems. The industry still faces issues with supply, mortgage availability, rising house prices, and high barriers to entry for first-time buyers (who, incidentally, are likely to be hardest hit by an economic downturn).
This seems compounded by the fact that the measures extend to help those buying a second home or investment property. Is this really the part of the market that needs a leg-up?
Finally, it’s worth asking whether the reduction is enough to spark the confidence potential buyers need to sign up to the long-term liability of a house purchase? Many people will, understandably, still want to wait and see how the economic situation develops over the next six months. After all, the ghosts of 2008 still loom large in the public consciousness.
None of this is to denigrate a much-needed boost for the housing market, on balance, the reduction is a good thing. However, it’s clear that if the sector is to continue its surprisingly positive trajectory, we need more. Much more.