The housing market is likely to be heavily distorted over the next few months by the ending of the stamp duty holiday. With the average sale taking around 4 months to complete, it is unlikely any new sales will make the 31st of March cut-off. There are, though, still large numbers of sales in the pipeline (613,000) and it is thought as many as 100,000 will miss the deadline (source: Rightmove).
New sales and listings, as you might expect, are beginning to slow. According to RICS’ Residential Market Survey – new buyer enquiries had a net balance of +15% (down from +26% in November), new instructions had a balance of +7% (down from +15%) and agreed sales +18% (down from +24%). However, it’s what happens after the stamp duty rush is over that is not yet clear.
Sales tend to go a little flat after stamp duty rises, yet this time around we may well have the added impetus of people coming out of lockdown, wanting to move home. In addition, with the rapid deployment of the various Covid-19 vaccines, there will be a feelgood factor. The Bank of England has already indicated it believes the economy will quickly recover, saying:
“GDP is projected to recover rapidly towards pre-Covid levels over 2021, as the vaccination programme is assumed to lead to an easing of Covid-related restrictions and people’s health concerns.”
Russell Galley, Managing Director, Halifax, takes an equally positive view of the housing market over the coming months:
“We saw the power of homeowners to drive the market in the second half of last year as many people looked to find new properties with greater space, spurred on by increased time spent at home. Such structural demand changes, coupled with any further policy interventions by government, could yet sustain underlying market activity for some time to come.”
And, with pressure growing on the chancellor, Rishi Sunak, there is a chance the stamp duty holiday might be extended.
A petition of over 140,000 names was recently handed into parliament demanding a six month extension, forcing a debate on the issue. During it, there was cross-party support for an extension of some kind. Many MPs also agreed there should be some sort of tapering arrangement rather than a cliff edge end to the holiday. However, Jesse Norman, who is financial secretary to the Treasury, said it was not appropriate during the debate to “comment on tax policy outside a fiscal event”. If there is to be an extension, it is therefore not expected to be announced until the next budget on 3rd March.