MPs call for stamp duty holiday extension as experts warn of housing market collapse

Tuesday, 2nd February 2021, 11:28 am
Updated Tuesday, 2nd February 2021, 11:28 am
More than 140,000 people have signed a petition calling for an extension to the stamp-duty holiday - sparking a parliamentary debate. (Picture: Getty)

The Government has said it had no immediate plans to extend the stamp duty holiday - despite more than 140,000 people signing a petition calling for an extension, amid warnings the imminent deadline could spark a collapse in the housing market.

The number of petition signatures sparked an online, parliamentary debate on February 1.

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However, treasury minister Jesse Norman told MPs there were no definite plans to change the deadline - meaning anxious home-buyers facing a tax bill of up to £15,000 if they cannot complete by the end of the holiday may have to wait until Chancellor Rishi Sunak's budget next month for a definitive answer.

Mr Sunak announced the holiday last summer, raising the threshold for stamp duty on house purchases from £125,000 to £500,000 - meaning anyone buying a home for £500,000 or less would not have to pay any of the tax.

However, the holiday runs out on March 31 and experts are concerned the property market could collapse if it is not extended. The Government's stamp duty calculator shows someone purchasing a house for £500,000 would face a bill for £15,000 if they fail to complete by the deadline, sparking fears sales could fall through.

Jesse Norman, financial secretary to the Treasury, speaks during the online debate. (Picture: YouTube)

Answer on extension may not come until March

Both Conservative and Labour MPs said the tax break should be extended at the virtual debate.

Tory MP Elliot Colburn said a "tapered" end to the holiday would "help the market not suffer overnight shocks like it could on March 31".

However, Mr Norman said, although the Government was aware of the strength of feeling, there was no definite Government change of mind.

He hailed the holiday as a success, driving the property market through the Covid-pandemic, after the first lockdown in spring 2020 sparked a huge drop in transactions, but suggested it was the holiday's time limit that had driven the surge in activity, with transactions up 34 per cent year on year.

However, he said he "cannot comment on tax policy outside a fiscal event", meaning he could not speak about any possible plans for extension and interested parties may have to wait for Mr Sunak's Budget at the start of March for a definitive answer.

Mr Norman did say, however, that the Government would "continue, as it always does, to listen to representations from the industry and of people who are themselves looking to buy a property".

With house purchases taking much longer due to Covid restrictions, solicitors and mortgage advisers say they are struggling to meet the deadline and have urged the Government to extend it - particularly with the potential economic impact of the end of the stamp duty holiday, which is due to finish on the same day the Government’s furlough scheme ends.

Online estate agent Rightmove says its latest analysis showed it was taking more than four months from the time an offer was accepted until completion. (Picture: Getty)

'More than 600,000 sales stuck in processing logjam'

Online estate agent Rightmove says its latest analysis showed it was taking more than four months from the time an offer was accepted until completion - and estimated more than 600,000 property sales agreed in 2020 are “stuck in the processing logjam” and awaiting completion.

Prof Christian Hilber, a professor of economic geography at the London School of Economics, warned ending the holiday and furlough on the same day could “trigger a significant downturn” in property prices and the rental market.

He said: “If the stamp duty holiday or the furlough scheme are not extended, this is a double whammy.

“In fact, it could even be described as a triple whammy: the end of the stamp duty holiday has a negative effect on prices and volumes; the end of the furlough scheme reduces real incomes of the employed, reducing housing demand, so has a negative effect on prices; and the end of the furlough scheme will also likely trigger an increase in unemployment, which should lead to downward pressure on house prices in the lower end of the housing market and on rents.

“Certainly, if the stamp duty holiday and the furlough scheme really come to an end at the same time, there is a risk this triggers a significant downturn in the housing markets.”

Increased pressure to get deals completed

Helen Hutchison, residential property partner at law firm Irwin Mitchell, said: “An extension would no doubt be greatly received, not only by home buyers, but also by conveyancers and others in the industry coming up against increased pressure to get deals over the line by the deadline." 

Tim Aspey, managing director of Andrew Porter, an independent removals and storage firm, said: “We currently have record numbers of customers in storage hoping to move before the stamp duty holiday runs out. 

“As it stands, many people could miss out on the relief purely due to being unable to get a sale through in time.

“We urge the Government to extend the relief to help individuals improve their personal circumstances, as well as assisting the wider economy.”

'Initiative has worked'

Pete Mugleston, from the onlinemortgageadvisor.co.uk, said: “Everyone knows far too many people will miss the deadline. Thousands of deals will collapse as those relying on the discount to make the deals work break the chain and all other parties have to wait for a new buyer - the total cost to everyone involved could be huge. 

“The frustrating thing is the initiative has worked - the market has been significantly stimulated - but many will have spent money in good faith they can ill afford to lose and will never complete, through no fault of their own. 

“The government cannot deem the initiative a success if it lets down so many of the dormant buyers it aimed to inspire."