Housing boost: Rishi Sunak is today expected to announce six-month stamp duty holiday
The Chancellor of the Exchequer is under pressure to revive the housing market after figures showed prices have suffered their worst run since 2010. After four consecutive months of falls were reported by mortgage lender Halifax, Rishi Sunak is today expected to announce measures to get things moving again.
The most eye-catching could be a six-month stamp duty holiday, exempting buyers from paying the levy on properties worth less than £300,000, or even £500,000.
Sunak is also expected to offer homeowners vouchers for energy-saving property improvements worth up to £5,000. But experts warned more support is urgently needed to boost the market, as fears grow that a coronavirus recession will hammer prices.
They have warned the Chancellor that he risks gumming up property sales – rather than helping them – unless he either rules out or immediately introduces the stamp duty cut.
Jeremy Leaf, a London estate agent and former chairman of the Royal Institution of Chartered Surveyors, said there had been a huge ‘release of pent-up demand’ since the housing market reopened in mid-May.
There is now increased interest among city-dwellers in moving to the country, he said, as well as families looking to buy bigger homes. But he said some customers had already put their purchases on hold this week in anticipation that a stamp duty cut was coming.
‘He [Sunak] has got to just do it or make clear he is definitely not doing it,’ Leaf said. ‘At the moment we have people pausing transactions, saying they won’t do anything until they know for sure.’
Backers of a stamp duty cut say it will help spur the market by giving people who want to upsize more spending power, and elderly people more of an incentive to downsize – providing people further down the ladder a chance to move up.
Kevin Roberts, director of Legal & General Mortgage Club, said that it would also deliver a major boost to first-time buyers, who could be ‘the engine that drives the housing market forward this year’.
Stuart Adam, an economist at the Institute for Fiscal Studies, said a stamp duty cut would bring knock-on benefits too, with more people moving home tending to increase the number of home improvements and sales of DIY materials.
The Home Builders Federation has called for an extension of Help to Buy, saying that some 18,000 home sales could be called off otherwise because the houses won’t be finished in time
‘These types of tax changes can have a very powerful effect and encourage people to bring forward purchases,’ he said.
‘The flip side is that they are sometimes followed by a hangover, which is not something you want if you are still in a recession, so the timing of this is the very difficult judgement the Chancellor has to make.’
However, experts say that Sunak should extend the Help to Buy scheme and work with other ministers to reform planning rules.
Help to Buy, which provides taxpayer-backed loans to buyers of new homes, is set to end in its current form in April – although in practice the cut-off will actually be December because of building schedules.
The new scheme will only apply to first-time buyers and will impose regional price caps on how much can be borrowed.
But experts say Help to Buy is now even more vital for first-time buyers now that top lenders such as HSBC and Nationwide have temporarily stopped offering mortgages that only require deposits of 5 per cent.
Financial advice service Moneyfacts says there is ‘huge demand’ for 5 per cent mortgages but only 22 were available yesterday, and many of these only to certain types of professionals or people who could provide guarantors.
Industry body the Home Builders Federation has called for an extension of Help to Buy, saying that some 18,000 home sales could be called off otherwise because the houses won’t be finished in time.
David O’Leary, the organisation’s boss, said: ‘Coronavirus forced the industry to shut down and while builders are now back on site, completions have inevitably been delayed.’
But Matt Kilcoyne, deputy director of the Adam Smith Institute, says planning reforms that would allow speedier conversion of offices into homes are needed, as well as changes to cut the time needed for conveyancing.
This and a cut to stamp duty would be far more effective than extending Help to Buy.
Protecting jobs and people’s incomes is vital as well. ‘If you don’t have a job, you can’t pay your mortgage,’ Kilcoyne adds.
Overall, analysts at Knight Frank predict house prices will fall 7 per cent this year.
Oliver Knight, head of residential research, said: ‘We are seeing a pretty benevolent approach from lenders and with interest rates likely to stay low for some time, borrowers are not going to be under the same pressure they have come under previously.
‘That, and the swift action the Government has taken so far, mean the market is a bit more insulated than it has been before.
A cut to stamp duty is certainly going to have an impact in terms of affordability and probably the most obvious other way to help is an extension of Help to Buy.’
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