Covid-19 affected the world as a whole. From the real estate industry to the retail sector, and even educational institutes faced the brunt of Covid 19. Economies around the world took a big hit because of the lockdown that followed due to Covid 19. Plus, the loss of jobs, salary cuts, increase in unemployment, and the number of people who relied on their savings to meet their daily requirements, Covid 19 changed the world as we know it. To boost the economy and improve buyer confidence, Chancellor Rishi Sunak decided to introduce a stamp duty holiday until 31st March 2021. From estate agents in Buckingham to potential buyers in Leeds, this news of stamp duty holiday came as great news. Now, the question at hand is, did stamp duty holiday do the job that it was supposed to? Did stamp duty holiday ensure that homes start selling in full tilt until the March 20201 deadline?
What is the stamp duty holiday?
First, let’s talk a little about what the stamp duty holiday is. The government has put a temporary ban on stamp duty on properties for sale in England and Northern Ireland. Properties costing up to £500,000 will not have any stamp duty levied on them, Properties that are between £500,001 to £925,000 will have just 5 percent stamp duty while properties between £925,001 to £1.5m will have 10 percent stamp duty. However, properties that cost £1.5m and more will continue to have 12 percent as the stamp duty. The aim of the stamp duty holiday was essential to boost buyer confidence, to encourage people to move homes, to revive the real estate market, and boost the economy as a whole.
Who was motivated to buy property because of the stamp duty holiday?
First time buyers saw stamp duty holiday as a big incentive to start looking at properties. Even current homeowners showed interest in viewing new properties once the stamp duty holiday was announced. With so many people sitting at home during the lockdown, thoughts of home improvement and moving into bigger homes became very common. Most working people wished to have a home office, which meant moving into bigger homes to make the wish come true, for some people. Others wanted to move into bigger homes with patios and gardens so that they could enjoy being at home. The lockdown made homeowners feel that they wanted to improve their homes and their lifestyles. This indeed motivated people to use the opportunity at hand and start looking at properties that were an upgrade from their current homes, without having to pay too much money in stamp duty.
Has stamp duty holiday ensured that homes are selling in a full-tilt?
According to research, South East England and London would benefit the most from stamp duty holiday because the property prices in these areas are high on average. Stamp duty holiday in these areas would allow buyers to save more, which would give buyers a huge incentive to invest. In fact, in London itself, there was a 27 percent increase in the demand for properties just within weeks of the announcement of the stamp duty holiday. The prices of property in the UK have seen a slight increase because there is a rise in demand while the supply is relatively low.
Since the UK government announced this incentive, more and more first time buyers are coming forward to purchase the property. Just in one week, between 3rd August and 8th August 2020, the number of homes for sale across the country was around 146 percent above the five-year average of properties for sale that were valued at less than £1.5 million. This is the main real estate section, where the impact of the stamp duty holiday was felt strongly.
As per the data from Knight Frank, the number of prospective buyers that registered nearly doubled within the first month of the stamp duty holiday incentive. According to them, the number of viewings for properties that were valued under £1.5 million rose by a whopping 46 percent from July to August while there was also a 13 percent increase in viewings for properties that were valued above £1.5 million.
Has stamp duty holiday worked?
In short, the stamp duty holiday has most definitely worked. While this is only a temporary measure by the government to boost the economy, the government might want to consider making this a more permanent feature. With the removal of stamp duty for properties valued under £500,000, as well as the significant reduction in stamp duty for properties valued between £500,000 and £1.5 million, there has been a drastic increase in the number of viewings as well as the number of buyers. In conclusion, the stamp duty holiday ensured that houses started selling in full tilt before the March 2021 deadline.