With lockdown measures gradually being eased and property market activity rebounding impressively in recent weeks, the market received another boost this month in the form of a stamp duty holiday.
As part of a mini summer Budget, Chancellor Rishi Sunak announced that people purchasing properties will not pay any stamp duty on the first £500,000 until March 31 2021.
The stamp duty holiday, which is applicable in England and Northern Ireland, is one of a range of measures announced to try and kickstart the economy after the Covid-19 pandemic.
The other key measure put forward by the Chancellor was a Green Homes Grant, a £2 billion initiative which will allow homeowners and landlords to apply for vouchers worth up to £5,000 to improve the energy efficiency of their properties.
However, with stamp duty generating the lion’s share of the headlines, we explain how it works and how much property buyers in the Midlands could save over the coming months.
Following the Chancellor’s announcement on July 8, the stamp duty threshold was immediately increased from £125,000 to £500,000. This means anyone purchasing a main property between now and March will pay no tax on properties priced up to £500,000 or less tax on higher priced properties.
It’s estimated that the policy will mean that nine out 10 main properties purchased during the holiday will be exempt from any stamp duty.
Analysis from Rightmove suggests that before the stamp duty holiday was announced, over 500,000 available properties on its website were listed with asking prices of below £500,000, representing 81% of all homes in England.
It added that some 84% of enquiries made to estate agents by prospective property buyers were for properties with asking prices set below the new threshold.
With the majority of purchases over the next ten months unlikely to require any stamp duty payment, the savings for consumers are likely to be significant.
Rightmove estimates that average purchasers in the West Midlands will save £2,262, while those in the East Midlands will save slightly less at £2,222.
More specifically, if you purchase a property for £300,000 you will save £5,000 in stamp duty. Meanwhile, buyers of homes worth £250,000 and £400,000 will make respective savings of £2,500 and £10,000.
Buyers of homes priced above the threshold will also benefit. A £600,000 property purchase will now require a stamp duty bill of just £5,000, down from £20,000 before the initiative came into force.
Buy-to-let investors and second home purchasers will still be required to pay the 3% stamp duty surcharge, but will not have to pay traditional stamp duty rates on the first £500,000.
For example, a second home purchase worth £350,000 will set investors back £10,500 in stamp duty, down from £18,000. Those purchasing for £550,000 meanwhile, will save £15,000 as the tax bill will be cut from £34,000 to £19,000.
First-time buyers have been exempt from pay stamp duty on the first £300,000 of purchases since 2017, but those acquiring more expensive homes will reap additional benefits.
As well as property buyers, sellers are set to benefit over the coming months thanks to increased demand for homes. Sellers who are buying a property at the same time will also benefit from stamp duty savings.
It’s expected that the stamp duty holiday will encourage more buyers to enter the market, which could push up prices for sellers and speed up transactions.
The early data indicates a significant boost already, with Rightmove reporting that traffic on its website soared by 22% in the first 30 minutes after the announcement.
The portal also reported that the number of prospective buyers contacting agents about properties for sale hit a new record on July 8, reaching a figure 93% higher than on the same day last year.
If you are thinking about putting your property on the market, now is a fantastic time to do so. Prospective sellers are advised to act quickly, however, as competition is likely to rise as movers look to take advantage of increased buyer demand.
As the country continues to recover from the knock-on effects of Covid-19, measures such as the stamp duty holiday should be welcomed and provide those looking to move home this year with a timely boost.
Here at Centrick, we are working alongside the new government guidelines to ensure we help our clients buy and sell homes in a safe and seamless way, using a digital-approach first where necessary.
You can find out about the services we offer across the Midlands and the rest of the UK by contacting us today. If you are looking to sell your home, you can request a free and instant online valuation to give you an idea of how much it could be worth.
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