He insisted it would never happen, but it now looks as if Rishi Sunak has caved in to demands and agreed to an extension of the Stamp Duty Holiday.
According to a report in today’s Times newspaper, the Chancellor is expected to announce a continuation of the Holiday until the end of June.
The three-month extension will bring relief to thousands of people currently caught up in property transactions in the UK. It means they’ll continue to benefit from the savings of up to £15,000 on a £500,000 home in England and Northern Ireland. Current schemes exist in Scotland and Wales, although the savings are less generous.
The extension is believed to be in response to pleas from property analysts concerned at the damage the ‘cliff edge’ ending of the scheme would do the property market. They insisted it would cause thousands of sales to fall through with the Office for Budget Responsibility, the fiscal watchdog, predicting a fall in house prices by at least 8% by the end of 2021.
More than 193,000 property buyers to benefit
TwentyCi, the research firm and number crunchers for the property industry, said the extension means savings for the 193,198 house sales that wouldn’t have made the March cut-off period.
But it means an additional £1 billion bill for the government. This is on top of a predicted extension to the furlough scheme – which Sunak is also expected to announce in his budget on March 3. That was due to end on April 30 with the extension calculated to cost the government around £4 billion a month.
House sales highest since 2007
The Centre for Policy Studies think tank said the Stamp Duty Holiday has pushed the number of house sales up to their highest level since the start of the recession back in 2007. They suggested the increase could be around 140%. Transactions rose from 132,090 between April and June this year to 316,300 in the final quarter of last year.
HMRC figures show there were 129,400 sales in December alone last year. That compared to 87,040 in December 2014.
Property portal Rightmove said the average number of days for a property to sell fell from 67 days in 2019 to 49 days in November last year.
Risk ‘Holiday’ may become permanent
But Paul Johnson, the head of the Institute for Fiscal Studies, urged Sunak to tread cautiously. He acknowledged that supporting the housing sector was a good move, but warned the chancellor could simply be storing up trouble for himself.
“Whenever it’s withdrawn you risk a period of stagnation and overblown house prices as you get towards the end. Extensions can become permanent,” he said.
Increases to corporation tax to pay for Holiday and Virus
To start to claw back some of the total £300 billion coronavirus spending over the past year, the government is believed to be announcing an increase to Corporate Tax, which currently sits at 19%. Figures circulating in government are 23% or 25%. America has already mulled over the idea of increasing their corporation tax from 21% to 28%.