In the latest January market report by national property consultancy, Carter Jonas, the case to extend The Stamp Duty Land Tax (SDLT) ‘holiday’ beyond 31st March 2021 is made. Citing ‘The Multiplier Effect’ as one of the main motivators for helping to stabilise the economy, the report also suggests that supporting first-time buyers specifically is a must to maintain a robust market.
THE MULTIPLIER EFFECT
Lisa Simon, Head of Residential, Carter Jonas says, “Clearly the housing market has been a very strong, robust and active sector for the last few months, and this is happening at a time when much of the rest of the economy is still struggling or growing at a slower speed. Following months of the global COVID-19 pandemic and its associated restrictions and lockdown measures, the UK economy has yet to return to pre-pandemic output levels. The housing market, however, is not just past pre-pandemic figures, in many cases it is reaching 5-10-year record rates.
“A strong and growing housing market contributes to the wider economy and reflects consumer confidence, and this then leads to greater spending patterns and ultimately job creation. On a micro-economic level, buying and selling homes contributes to growth, as it stimulates additional expenditure in the local economy."
Carter Jonas describes this as ‘The Multiplier Effect' – the accompanying spending associated with a house transaction, in both newly built homes and second-hand homes, benefits economic output as it requires materials, professionals, retail services, and creates jobs.
Direct industries affected in the property sector, include estate agents, conveyancers, surveyors, mortgage brokers, banks and lenders. Those indirectly affected include, builders, architects, painters and decorators, interior designers, plumbers and electricians, who rely on the act of people moving to a new house for new business. Finally, there are those impacted by the spending on goods and services once a move has occurred, such as paint suppliers, home furnishing outlets and wellness or home brands - the ripple effect is dramatic.
RELIEVING 'ON THE BOOKS’ PRESSURE
An extension would help alleviate the backlog of paperwork that is a result of current rates of house sales, mortgage approvals and transaction levels running at a 10-year high.
Conveyancers across the country have suggested that the current workload is so high that they are straining to deal with the volume of work that needs to be processed, and sales are subsequently taking longer to exchange contracts. If there is a large pipeline of agreed sales still ‘on the books’ come in the next few weeks, then Carter Jonas suggests that an extension may be necessary to get those over the line.
Across its 33 London and regional offices, Carter Jonas is experiencing high demand, with buyers wanting to capitalise on the stamp duty levy and make lifestyle changes, but who are being thwarted by a system that is struggling to cope with the current climate.
Rupert Reeves, Head of Residential Sales for Newbury at Carter Jonas says, “Due to Covid-19, reduced teams, and home-schooling pressures, many solicitors and surveyors are struggling to meet work deadlines, and it now takes longer to buy or sell a house than ever before. Understandably, there is a frustration felt by buyers and sellers, so giving everyone in the process some leeway will help get more deals over the line.”
KEEPING FIRST TIME BUYERS IN THE GAME
With vaccines now being rolled out, there is optimism that the economy should begin to recover over the coming months. At the same time, with the SDLT holiday coming to an end, it is anticipated that housing market activity is set to decline as demand from some sources will decrease, slowing the upward pressure on prices.
First-time buyers account for 35% of all purchases every year. Carter Jonas’ latest market report suggests that if the SDLT holiday is extended for up to six more months for this group, there will be one source of demand that remains robust and growing, and it is the cohort of buyers who would benefit most from the tax break.
Lisa Simon, continues, "This group has been disproportionately disadvantaged by the current strength in the housing market: rising house prices push a purchase yet further out of reach for first-time buyers. This group have also been disadvantaged by the large-scale removal of higher LTV mortgages that we have seen throughout 2020. Last year 90% + LTV mortgages accounted for around 20% of all mortgage products, this has decreased to around 5% now, and these are the products that many first-time buyers would normally need.”
Therefore, extending the SDLT holiday at a time when the market could enter a period of subdued activity would not only help those that need it most in an economic downturn but would help multiple industries continue to function and prosper at an uncertain time.