Thanks to zero rate stamp duty
The residential sales property market has been “on fire” in recent months courtesy of the Government intervention on stamp duty where a zero rate was applied on the first £500,000 of all purchases.
The surge in activity and transaction numbers threatened to overwhelm the ability of those operating in the industry – agents, conveyancers, brokers, surveyors, mortgage lenders etc – to cope and meet the deadline of 31st March 2021 when the original “stamp duty holiday” was scheduled to end.
The Government decided to extend the deadline to the 30th June, and to try and offset the creation of a second “cliff edge” deadline have also extended the discount beyond June to 30th September but at a lower rate of zero up to £250,000. Those buying second homes still pay a 3% surcharge on whatever stamp duty level applies.
Some are critical of Government intervention in free markets but there is no doubt that this action has created significant volumes and showed the level of pent-up demand in the market. Of course, many transactions will have been brought forward by people looking to benefit from the discount and there may be a slowing of activity and volume as the deadlines approach.
Government revenues from the tax have been at near record highs despite the lower levels of money per transaction being taken and this is further evidence that stamp duty should be subject to reform and change. There is much talk of it being replaced with some form of annual property tax or shifting the responsibility for tax to the seller rather than the buyer. Charging tax based on the differential between two linked property transactions is another possibility and this might encourage people living in larger properties to downsize and free up stock for others to trade up in size. We shall see.
The pandemic has seen a paradigm shift in many aspects of our lives, many of which will impact significantly on future housing needs. Many of these changes were underway before covid but have accelerated as a result of the pandemic. Here are just a few:
Escape to the country: There has been a move away from city centres and into more open locations. Some of this movement is likely to reverse as many people will miss the proximity to others and closer access to amenities.
Working from home: It is likely that, as infrastructure such as superfast broadband and better transport links increase, the moves made to work from home will become more established and permanent. Despite technology, the “isolation” of working from home is likely to become part of a mixed and more flexible solution with people sharing their time between a business workplace and home.
Working from home will likely add to the movement away from city centres as people will trade a longer commute to work for a different lifestyle particularly if they are not doing the commute five days a week.
Commercial: The retail sector was already moving on-line and the pandemic has accelerated this significantly. The retail footprint in our town and city centres is changing and innovative redevelopment to stop these areas “dying” will be needed. This is likely to include more “destination” uses and changes to incorporate more residential in order to keep these areas “alive” Many office buildings are now being converted to residential use as the need for large volumes of business space reduces due to home working, hot desking and more flexible and technology based operations.
In conclusion, most property pundits, including us at Wilsons, are confident that we will not see any form of collapse in the housing market and that we will move forwards strongly and positively.