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The chancellor has set a new stamp duty deadline as part of measures he announced in the autumn statement.
Jeremy Hunt said he would maintain the stamp duty changes introduced by his predecessor Kwasi Kwarteng in September, raising the threshold below which no stamp duty is paid from £125,000 to £250,000 – but only until March 2025.
The move creates a new stamp duty deadline, something that historically has not worked well for housing market stability.
This is because buyers rush to meet the deadline, with real estate transactions “falling off a cliff” immediately afterwards.
Jeremy Hunt said he would keep stamp duty changes introduced by his predecessor, but only until March 2025
Commentators have responded to the deadline by saying it would prompt some buyers – particularly first-time buyers – to rush their decisions, and that it would create a “bottleneck” of transactions by early 2025.
Given that the total time it takes to buy and sell a property is currently around six months, that means buyers should be well on their way to moving in by the end of summer 2024.
The deadline can hit some first-time buyers hard, as they now have less time to save for a down payment.
Real estate website Rightmove said the clock was already ticking for buyers looking to take advantage of the stamp duty savings, particularly for first-time buyers who typically take five years to save enough for a down payment.
Tim Bannister, of Rightmove, said: ‘The clock now ticking on possible stamp duty savings will bring a little more urgency to people trying to get up or move up the ladder in the coming years.’
There is also concern about what happens once the deadline is reached, as historically the market has fallen off a cliff once any form of stamp duty ‘holiday’ comes to an end.
Richard Campo, of broker Rose Capital Partners, said: ‘It’s a very bad idea to put a deadline for the stamp duty changes. The only good thing that came out of the infamous mini-budget was that stamp duty was not time-limited.
What always happens when you make a deadline? It creates a rush to meet the deadline, which artificially inflates prices, and also, what comes next? Go back to the current arrangement or not? That was not mentioned, so the devil is in the details here.’
What is stamp duty and how does it work?
Stamp duty land tax – as it is officially known – is levied on the purchase of property or land above a certain price in England and Northern Ireland.
The lowest thresholds at which it is charged were raised by the previous government.
The threshold was set at £125,000, but former Chancellor Kwasi Kwarteng announced in September that this would double to £250,000.
At the same time, the threshold for starters was raised from £300,000 to £425,000.
Today the new Chancellor, Mr Hunt, said these changes would only last until March 2025.
The deadline is probably the most challenging for first-time buyers, as it takes them an average of five years to save enough for a down payment, Rightmove says.
Mr Bannister from Rightmove added: ‘We could see a jump in new sellers towards the end of next year and into 2024 to ensure they can move in on time. The total time it takes to buy and sell a property is currently around six months, meaning people should be well on their way by the end of the summer of 2024.
“It is probably most challenging for first-time buyers with a smaller down payment, as we know it currently takes them an average of five years to save enough for a down payment.
“The average monthly mortgage payment will be lower if they can make a larger down payment, so we could see more people looking to friends and family for help with a down payment to help them advance their plans before the current stamp duty savings wear off in 2025. ‘
Nick Leeming, from estate agent Jackson-Stops, said: ‘The reversal of the stamp duty reduction on properties under £250,000 and £425,000 for first-time buyers is unwelcome news for the housing market.
Perhaps one of the few positives of the ill-fated mini-budget, the decision to put a time limit on the tax credit is likely to create a bottleneck of transactions in the first quarter of 2025 as buyers scramble to get the more favorable stamp duty.
While this rush to win a sale won’t be seen to the same extent during the last stamp duty holiday, this time limit will no doubt factor into many new buyers’ decisions as these savings could be spent on utility bills, lawyers. “fees or upgrades for the house they buy.”
Mr Hunt’s stamp duty announcement was part of a wider package of measures affecting the housing market, including council tax increases, changes to the capital gains tax and a social rent cap.
And Sarah Coles, of Hargreaves Lansdown, said: ‘Property buyers will have been thrown into a quandary by the stamp duty announcement. Right now the market is giving every possible signal that they want to put up the heat because we could hit the peak. So it will make their decisions even more difficult now that Jeremy Hunt has warned them that if they wait too long they will end up paying more stamp duty.”