Posted on Monday, July 13, 2020
As we continue to move out of lockdown, the government recently held a mini summer Budget to announce a range of measures designed to kickstart the economy.
There were a number of property market measures announced by Chancellor Rishi Sunak, including a green homes initiative. The headline policy, however, was the announcement of a temporary stamp duty holiday for people purchasing properties in England and Northern Ireland.
Below, using our experience as estate agents operating across Romford, we explain how the stamp duty holiday works and what it could mean for the local property market.
What was announced?
Although he left it to the end of his address, Rishi Sunak's stamp duty holiday has, as expected, generated plenty of headlines. The measure means that there will be no stamp duty on the first £500,000 of all property sales in England and Northern Ireland until March 31 2021.
The threshold for stamp duty - the tax you pay when purchasing a property - is now set at £500,000 as opposed to £125,000.
The Chancellor suggested that this means nine out of 10 main homes sold between now and the end of March next year will not require purchasers to pay stamp duty.
According to Rightmove, there are currently more than 500,000 available properties with asking prices under £500,000, representing 81% of all homes for sale in England.
The property website added that before the stamp duty holiday announcement, some 84% of buyer enquiries were for homes priced at £500,000 or below.
How does it work?
If you buy a main residence between now and the end of March, you will not pay stamp duty on the first £500,000 of the sale price.
Savings for buyers are likely to be significant. For example, if you bought a £300,000 property before July 8 when the measured was announced, your stamp duty bill would have been £5,000. A property costing the same figure will now see buyers exempt from paying any stamp duty.
If you purchase a more expensive property at £600,000, for example, your stamp duty bill would now be £5,000, as opposed to £20,000.
Since 2017, first-time buyers have been exempt from paying stamp duty on purchases up to £300,000, but the new initiative will also benefit first-timers buying more expensive homes, as well as all other buyers purchasing a main residence.
If you are purchasing a second property such as a holiday home or buy-to-let investment, the 3% stamp duty surcharge will still apply, but you won't have to pay the traditional stamp duty rate on the first £500,000.
For example, this means the tax bill for a second property costing £280,000 will now sit at £8,400, down from £12,400.
What could it mean for buyers and sellers in Romford?
In many cases, the significant savings buyers make could allow them to increase their budget to buy a more expensive property or use the money to renovate a home.
Rightmove reports that in June 2020, the average asking price in London sat at £628,284. This means the typical buyer in the capital would make a saving of £15,000.
The market had already recovered strongly since it reopened on May 13 and this new measure is expected to provide a further boost. Prospective sellers who had been thinking about putting their home on the market may be encouraged to act sooner, providing a wider pool of homes for buyers to choose from.
Meanwhile, those sellers will be boosted by a surge in demand which could continue all the way through to next spring. Rightmove reported that in the first 30 minutes after Sunak's announcement, traffic surged by 22% as eager buyers assessed their options.
More buyers in the market means a seller's chances of achieving a quick transaction and securing their asking price or above are vastly increased. That said, favourable conditions will mean competition is high, so sellers are advised to list their homes now and make sure they are in tip-top condition to attract prospective buyers.
As we all continue to recover from the impact of the Covid-19 pandemic, the stamp duty holiday marks a positive step forward for the property market and those looking to move home this year.
If you require any further information on stamp duty or any part of the buying or selling process, please get in touch with our expert team today.
To get an idea of how much your property could be worth for sale or to let on the current market, you can request a free and instant online valuation here.