Stamp Duty Holiday Fuels Surge in UK House Prices
Now in post-lockdown, the UK housing market has recently experienced a ‘mini-boom’, said to be pushed by the latest stamp duty holiday, which will last until the 31st March, 2021. As the market emerges from COVID-19’s lockdown, buyers are now rushing to take advantage of the new tax break, whilst sellers hurry to put their properties up for sale.
Rightmove has reported an increase to both the number of deals, average asking prices and rental properties hitting the market for this month, with London reported as being up by half a per cent since the start of lockdown – an increase of £3,209.
In addition to this, the average UK home is now reported to be worth more than £320,000, signifying a 2.4% increase from March. This uptick represents a growth in the annual asking price of 3.7%.
Rightmove’s director and housing market analyst Miles Shipside has commented on this exciting, yet unexpected, change to the market, stating the following on the matter:
“The spring market has now picked up where it left off and has been accelerated by both time-limited stamp duty holidays and by homeowners reappraising their homes and lifestyles because of the lockdown,”
“These figures are the earliest indicator of house price trends. They show prices gently rising not falling, and this will be reflected in the coming months.”
The report from Rightmove also revealed that during July, buyer enquiries were up a whopping 75% compared to the same time last year, with 44% of properties that were on sale from the 13th May now being under offer.
This recent surge to the property market is likely to have been accelerated by the recent implementation of the stamp duty holiday, said to last for eight months until the 31 st March
2021. The tax break was announced by Chancellor of the Exchequer Rishi Sunak during his summer mini Budget earlier this month, with homes priced up to £500,000 being exempt.
Those from within the industry have also attributed the ‘working-from-home’ effect to be a significant driver of the market’s recent mini-boost, Paul Clarke from Mr & Mrs Clarke estate agents commented: “Our clients are saying that they want to sell up in London and go out to benefit from the cheaper house prices and get more space for their money.”
“Although there is a concern about their employment, clients are saying that they want a home they can work from and they don’t mind a longer commute as they will be doing it less frequently.”
What is Stamp Duty?
Stamp duty is a compulsory tax that you pay the UK Government on the purchase of a property. Very simply, the more expensive the property, the more you pay. In addition, there is a higher stamp duty if you are buying a second or third home.
The cost of stamp duty goes up the higher the value of your property and you have 30 days to pay after completion. The solicitor handling your property purchase will typically pay the stamp duty on your behalf and there are penalties if this is late, which can be 10% to 30% of the full stamp duty owed.
If you wish to pay the stamp duty yourself, you will need your unique 11-digit reference number and you can pay the HMRC directly online or by phone. Importantly, payments can take up to 3 days so you should try to pay early to avoid penalties.
How Has Stamp Duty Changed Under Covid?
In light of Covid-19, the UK’s chancellor Rishi Sunak has launched a scheme that will run until 31 st March 2021 that will make all stamp duty payments except for properties up to £500,000.
Homeowners typically looking to buy properties up to this amount would have paid 1% on a property between £125,000 and £250,000 (£1,250 to £2,500) or 3% on a property between £250,000 and £500,000 (£7,500 to £15,000).
The change in policy is designed to help stimulate the housing market during an unprecedented time, particularly helping young and first time buyers to get on the property ladder. With a potential saving of £15,000, it is a real motivation to start buying.
Who Wins and Loses From The Stamp Duty Change?
First time buyers are clearly the winners from this new reform and those who are looking to move house, but pay less than £500,000 asking price.
The losers from this stamp duty change are those looking to buy properties just above £500,000 or the ones who completed their deals before the new laws came in.
Potential buyers and investors have up to 31st March 2021 to find their new property and complete to make the most of this saving.
What Other Fees Come With Purchasing a Property?
You will need a survey of the property you wish to purchase. You can hire a surveyor independently and this generally ranges from £300 to £1,000 depending on how large and complex the property is. For more expensive homes or those which are more specific (e.g farmhouses), a survey can easily cost more than £1,000.
Your mortgage provider will often require a survey and they will pay for their own one. You may want a survey done independently to check for any issues with electricals, the area, water, subsidence, plumbing, asbestos and more. The potential costs could be significant if you miss these.
You should expect fees from your solicitor for processing your mortgage and completion. Legal fees range depending on who you use and how long the project takes to complete. This will commonly run in the thousands of pounds.
If you are using a mortgage broker, you should expect a broker fee ranging from 1% to 2% (this is negotiable). You may also be required to pay an arrangement fee of 1% which is usually paid a lot sooner and is kept by the broker or lender if the deal falls through.
If you are having any building works done, whether it is electrical, plumbing, extensions or more, this will be a cost that you will pay on top of the purchase. Even if various parts of the house are not fully functioning, if you only notice this upon arrival, you will be required to cover the costs.
Depending on how much stuff you have, this could cost around £1,000 or more. You will have to find someone independently to help you move and all companies charge different rates. If there are only 1 or 2 people in the home, you may not need a moving company, but moving a family of 5 with lots of furniture will easily cost £1,000 upwards to move safely and successfully.
Letting agent fees
If you’re buying a property as part of an investment, you can expect to be charged letting agent fees for finding tenants. Fees vary and are dependent on the exact services you need. Online letting agents offer cheaper alternatives, usually with some of the duties concerned with renting out a property pushed back to the landlords
You will need insurance when buying a new home to cover any building damage and contents inside. If you lose anything whilst moving or it is damaged, you will have insurance cover to replace any important items to you. There is also the risk that when carrying out building work that it damages something in your home or injures a neighbour or passerby – so having home insurance is crucial for this kind of thing.