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Stamp Duty is a form of tax which is paid when you purchase property or land above a certain price threshold in England and Northern Ireland. The Office for Budget Responsibility said the level of house prices remains at 17 percent lower over the five-year forecast period, compared to March predictions. Express.co.uk speaks to property experts about what the end of the Stamp Duty holiday will mean for the property market and particularly house prices?
What is Stamp Duty?
Stamp Duty Land Tax is a lump-sum tax payment which is charged to anyone buying a property or land costing more than a set amount.
You encounter this tax when you buy a property or land.
The rate differs based on the price of the property, the type of property and the location.
In England and Northern Ireland, buyers pay Stamp Duty Land Tax, but in Scotland, it is Land and Buildings Transaction Tax, while in Wales buyers pay Land Transaction Tax.
What changes have been made to Stamp Duty?
As of July 8, the Government increased the Stamp Duty threshold in England and Northern Ireland to property sales worth up to £500,000.
For higher Stamp Duty thresholds, movers can now save as much as £15,000 if they buy their home before March 31, 2021.
According to property website Zoopla, around 140,000 property sales are currently in the pipeline, which is double the number usually seen for this time of the year.
What will the end of the Stamp Duty holiday mean for house prices?
The UK housing market has boomed since the first lockdown came to an end which is a result of a rise in demand and the Stamp Duty holiday.
However, when the Stamp Duty holiday comes to an end in March, house prices may be hugely impacted.
The recent Office for Budget Responsibility report said: “House prices fell briefly as the pandemic struck, but recent indicators suggest they have subsequently recovered quite strongly.
“This follows the easing of public health restrictions and the stamp duty holiday for residential property transactions that took effect on 8 July 2020.”
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Property expert Gary Hemming from ABC Finance said only time will show how house prices will change in the coming months.
He told Express.co.uk: “House prices were predicted to fall as soon as lockdown hit, but that hasn’t really panned out.
“The Stamp Duty holiday is being cited as a potential reason, so it’s definitely worth keeping an eye on prices when that ends.
“We’re seeing a lot of people who are reassessing where and how they live, with many looking to move away from busy city living into calmer, more rural settings.
“Time will tell whether the trend continues.”
He added the coronavirus pandemic and Brexit outcome will likely have a large impact on the property market.
Mr Hemming said: “We’ve got both COVID and BREXIT to contend with here, so there’s a lot left to happen before the stamp duty holiday ends.
“Naturally, you would expect prices to fall slightly, but there seems to be so much pent up demand and a very British attitude of defiance, that a drop is beginning to look less and less likely.
“The ‘keep calm and carry on’ spirit appears to be alive and well.”
Property expert David Price from 10ACIA Construction said there is a risk of zero growth with house prices after the Stamp Duty holiday comes to an end.
He told Express.co.uk: “If the government aren’t careful to massage the policy out, vs ending it on a cliff-edge (either “on”, or “off”) – we risk seeing house prices with zero growth, with the strong possibility of negative falling house prices.”
Mr Price added that the Government is likely to step in to avoid a property crash.
He said: “I believe the government will step in and adjust the way the stamp duty holiday is to come to an end.
“Currently, it’s too abrupt, and will largely undo the recovery work the tax holiday has given to the wider property market – which significantly contributes to the UK economy.
“Risking damage to this will want to be avoided at all costs by the government. Another reason, this is not 2008.
“The banks are now liquid, and finance is cheaper than it’s ever been. So borrowing, investment in business growth is hugely encouraged.
“What will happen, is a slow down of the market, due to the rush not being there to capitalise on the tax-saving – but people still need houses, more people will be getting divorced and separated due to lockdown, and we’re still miles off the mark from building enough houses – so the demand still outstrips the supply.
“If a correction in house pricing is to be seen by the market, this will only be back to a level of pre-lock down.”
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