Rishi Sunak recently announced the stamp duty holiday, which makes experts feel that the house prices could go up. Also, it is believed that the duty holiday might not help anyone new acquire a new house. This article explores the impacts that the new stamp holiday might have on house prices.
The Chancellor has raised the threshold at which the levy begins at £500, 000 and this will imply that £14,200 savings among average non-first property purchasers. Paul Johnson is the director of the Institute for Fiscal Studies, and he told the Standard that the lifting of the stamp duty threshold up to £500, 000 will bring a huge benefit by a colossal fraction of property transactions based in London compared to any other part of the country.
The savings accrued from the increase of the threshold might be quite significant, but the chances are that they will be shared among buyers and sellers. This is because the sellers have many reasons to raise the selling prices for properties.
Experts have also warned that the boost might end in March 2021. There is also a risk related to the fact that the economy has not gained stability. Therefore, the house prices might still be somehow unpredictable in the next few months after the scheme.
There is upward pressure on the house prices due to the stamp duty holiday that was put in place. However, this might also be changed by the economic bumps that are felt by some households due to the rise in the unemployment rate.
According to the Resolution Foundation, the £3.8 billion stamp duty regulation amounted to tax relief for Londoners. It also suggested that the gain from raising the threshold would be around £14,200 for average homes based on London with value put resting at £486,000, according to the figures in January 2020.
On average, the stamp duty bill in London could fall by as high as £14,180, which is equal to a 15% discount, but this is only for zone 1. In Zone 5, it will go by £9, 640, which is equivalent to 69%. This is according to Hamptons International.
Other sources also claim that the changes put in place by Rishi Sunak could save home hunters as much as £15,000. Also, it is estimated that some individuals will save around 2.5% of their actual house prices. Second-home buyers and investors also have reasons to smile as the government gives them a reprieve by squeezing tax hikes.
In an average market, it is believed that the task duty might make the house prices to go up by a larger margin. This is because the demand might go up due to the tax cut. There will be increased competition for houses, and the buyers have the chance to make higher offers with the amounts they have already saved.
Helen Millar, a think tank from Institute for Fiscal Studies, mentioned that albeit it is the buyers who are needed to hand over the stamp duty, the impacts of the stamp duty could be easily passed through to the property sellers. Therefore, there will still be an increase the house prices.
The Bottom Line
The stamp duty holiday might seem to complicate things for the property buyers, even if it sounds like a great deal. Thus, the home buyers should be careful when striking deals with the sellers who might be looking to grab the advantage of the increased demand. Therefore, if you have been looking to buy a new property in London, this might or might not be the best time; it depends on how you play your game.