Youll no doubt have read about the stamp duty relief offered up by the Chancellor in the recent mini-budget. In short, there is no stamp duty to pay on property purchases up to £500,000, which equates to a saving of upto £15,000.
It should be noted, however, that the 3% premium for additional properties i.e. second homes and rental properties, still applies. Nevertheless, the withdrawal of the standard rate still means a decent saving for anyone who is buying a property, until this offer comes to an end on 31st March 2021 (as it stands).
Some are questioning whether this tax relief was actually necessary though. Since lockdown was lifted the sales market had been pretty strong, with online chatter of properties selling both quickly and at a good price. Nevertheless, the rules are the rules, so lets take a look at what it might mean for those looking to buy a property here in Chichester.
With the average sale price in Chichester currently standing at £376,285, the average buyer is set to save £8,814. That in itself would be half-way to the 5% minimum deposit buyers typically require.
When you consider the number of properties sold, along with the average price paid in Chichester between July 2019 - March 2020, the taxman would have collected £12 million from those buyers. So, if the same number of properties are sold at the same price (both of these figures are likely to be higher due to the new policy though) it could mean a substantial sum saved for those looking to buy in the next eight months.
Bear in mind though that first-time buyers already benefitted from stamp duty relief up to £300,000; which meant they had a £5,000 saving at this price compared to non-first-time buyers. The playing field has now been levelled, which has led to claims that it will now be tougher for first-time buyers to compete. That could be especially true as mortgage lenders seemingly tighten their criteria for those with smaller deposits on hand (typically first-time buyers).
Talking of mortgages and lenders tightening criteria; people are now realising that taking various payment holidays during the Covid-19 pandemic has resulted in them being rejected for new mortgage applications. As promised, the payment holidays havent actually affected their credit file. Crucially though, lenders are asking the question as to whether the applicant took a payment holiday and, if they did, are being rejected as a higher-risk accordingly.
I suspect there will be a mad rush in the Spring of 2021, just like there was before the additional properties premium was introduced in April 2016. In order to save the extra 3% stamp duty, a decade-high number of properties were sold in March 2016 (291) compared to a decade-low the following month (96). The number of properties being sold had been trending up nicely up until that point, but has been trending down ever since. I imagine a similar story might evolve with the latest cuts, as people wont want to buy in April, May and June of next year, having just missed out on the stamp duty savings.
Written by Clive Janes, CRJ Lettings; 01243 624599, firstname.lastname@example.org
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