Most people were waiting with bated breath to see whether the SDLT holiday would end on 31 March 2021 – especially those whose applications were still pending.  Now that it has been extended till the end of June, with a phasing out programme (no tax for properties up to GBP 250,000) till the end of September, relief has brought smiles back on the faces of people thinking about buying a property, including the estate agents, especially in the developing areas where the government’s Garden Towns are being planned.  The estate agents in Bicester are some among them.

However, how will the prices of property be affected by the extension of the stamp duty holiday?   Prices were predicted to fall in the second quarter if the SDLT holiday had ended at the end of March.  Now, the following may give an insight into expected property prices.

Demand vs Supply:   The demand has always been higher than the supply, and now, with the SDLT holiday extension, more people will probably want to take advantage of the benefits and opt for purchasing property. Hence, the demand will increase and, consequently, the house prices.

Delays in Processing:  Even before the SDLT holiday extension was announced, delays in processing documentation were caused as a result of the lockdowns – with valuations, mortgages, conveyancing etc.  With the extension, more people will apply for properties, which will cause more delays.  They will want to submit their applications at the earliest so that the documentation will be processed before the deadline.  Hence, property prices will probably sky-rocket to meet these demands.

Mortgage deals:  With the SDLT holiday extension, the government also announced a 95% mortgage guarantee scheme for properties up to GBP 600,000, and not only for first time buyers.  This will allow buyers to pay just a 5% deposit and, for at least five years, to fix their initial mortgage rate.   Lenders will offer attractive deals to buyers, resulting in an increase in the purchase of properties and will have an impact on property prices.

Foreign investment: foreign investors have always favoured UK property.  With the SDLT holiday extension applying to foreign buyers as well, there will likely be a boom in property purchases by foreign investors.  Even though from 1 April 2021, buyers from overseas will have to pay a 2% surcharge on their SDLT, it will not deter them.  As a consequence, property prices are likely to rise.

Larger accommodation with more space:  Although not as a direct result of the SDLT holiday, but as an effect of the pandemic, more people are now working from home. The urge has risen to look for bigger accommodation, with more rooms and space to make it convenient for a residence-cum-office.  Outdoor space has also become a priority. Being confined to the house during lockdowns, one of the essentials has become a garden or relaxation space.  This naturally involves a larger area, which will affect the cost of the property, resulting in a price rise.

Suburb and Urban property:  Despite the SDLT holiday,with the lockdown, property prices in the cities have fallen, while they have risen in the suburban areas.  However, with the rollout of the vaccine programme and hopeful return to near normal with restaurants, shops and offices reopening later in the year, property prices may also see a rise in the city areas.

First time buyers:  Although first time buyers are also applicable for the tax benefits with the SDLT extension, some feel that the price increases and greater competition for property have not really helped first time buyers who are yet to get on to the property ladder.  Hence, there was a slight fall in the proportion of first time buyers in the second half of 2020, which may predict for this year as well, unless property prices are brought within their reach.  Also, the surcharge of 2% with effect from 1 April 2021 for first time buyers may affect their purchases.

Conclusion:  The seemingly overwhelming majority is that there will be a rise in house prices due to the stamp duty holiday extension.  This will benefit the economy also and, in turn, help the government to encourage more development in the “generation rent to generation buy” proposal.  The UK property market has always been strong, and though the end of the SDLT holiday may see a slight slump in property prices, the market is sure to remain resilient.  A word of caution:  there have been warnings of fraudsters trying to target the SDLT holiday extension with attractive fake deals to the public.  Be careful, and the best bet would be to allow a professional estate agent to advise you of the next step to take if you are looking to buy or invest in property.

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