The stamp duty holiday will finally come to an end at the end of September, having been in play since July 2020. It’s played a major role in sustaining demand and market momentum throughout the pandemic, although some have questioned its actual effectiveness in helping people onto the ladder.
The first stage of the holiday, for all homes worth up to £500,000, came to a halt on June 30 – with a slight dip in demand after this. Currently, all homes worth up to £250,000 are eligible for the stamp duty holiday, and all buyers – including landlords and investors – can take advantage of the possible tax savings.
There is expected to be another late surge before the holiday comes to a close entirely, with September set to be a busy month as buyers, sellers, agents, conveyancers, surveyors and lenders battle to get huge number of transactions over the line.
But what will happen when the holiday is no longer?
Already baked in
It’s been argued that most buyers and sellers have already factored the end of the holiday into their plans, and will continue with their transactions even if they don’t complete in time before the end of September. The tapering down of the holiday would appear to have averted any chances of a dreaded cliff-edge scenario.
That said, there is still set to be a market dip after the holiday ends as some of the record high demand falls away. However, the holiday is not the only thing sustaining the market at present – far from it. Record low interest rates, competitive mortgage lending, strong borrowing conditions and government incentives such as the 95% mortgage guarantee scheme and the First Homes scheme are expected to keep demand high even once the holiday ends.
It has previously been predicted by Savills and Zoopla that more than 1.5 million transactions will take place in 2021, taking the market back close to its 2007, pre-financial crisis peak. This is also up some 45% on 2020, which saw a booming market despite various lockdowns and the two-month shutdown of the market in the early part of the pandemic.
However, with very high levels of transactions comes the much greater possibility of more fall-throughs occurring. Even in normal times, the fall-through rate in the sales market is worryingly high and logic dictates that this will only rise with more transactions in the system.
Taking away the stamp duty safety net could see some change their plans drastically. While this is only expected to be a very small number, even small numbers of withdrawals or changes of heart can have a drastic impact on a range of sales. The domino effect can very quickly come into play where house chains are concerned.
No boom and no bust
The most likely scenario after the stamp duty holiday ends is a continuation of the current marketplace, which is witnessing record demand and record high prices. It doesn’t seem likely this will boom even higher, but neither will it bust as some feared when the original end deadline was set for March 2021.
If a housing crash were to happen, it would almost certainly have happened by now, but the strange thing about the pandemic is the impact it has had on the housing market. Rather than house prices falling and worries over negative equity coming into play, as is often the case in times of economic crisis, the unique circumstances of the pandemic actually made bricks & mortar more attractive than ever.
Changed priorities and lifestyles saw more people than ever wanting to move, or taking the plunge in their dream for home ownership. It seems inevitable the market will level off again soon, as the sustained boom since May 2020 – when the market reopened – can’t last forever.
But the fundamentals of the market remain strong, and there are no indications of imminent price falls or a massive decline in transactions. While interest rates remain low and there are various government incentives in place, demand seems set to stay, while sellers will continue to be attracted by the record number of homes selling for above their asking price.
Alternatives still required
While it seems very unlikely there will be a big bust moment for the market, or a housing market crash of any description, it is still important for agents to have a contingency plan in place for those times where it is needed.
There is likely to be a dip in activity in the immediate aftermath of the ending of the stamp duty holiday – as there was in July after June’s surge. There is also likely to be an increase in sales collapsing or stalling for various reasons, and here is where agents need their plan B.
Working closely with a chain repair specialist can help to keep transactions on the straight and narrow, and reduce the stress, cost, burden and hassle for those involved in a chain.
Here at HBB Solutions, we can help agents offer a plan B when it comes to chains collapsing and house sales falling apart. You can find out more information here or by calling 01509 680 065.