End of stamp duty holiday could trigger drop in house prices as 100,000 property deals hang by a thread
THE end of the stamp duty holiday next month could trigger a drop in house prices, experts predict.
It comes as property portal Rightmove warns 100,000 deals could collapse if the tax break isn't extended.
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The Chancellor slashed the land duty tax on the first £500,000 of a property's value back in July to kick start the housing market following the first coronavirus lockdown.
Rishi Sunak said that the break will save buyers around £4,500 when they move house, although the saving could be more depending on the value of the property.
But in reality, the duty holiday actually caused a mini-boom and pushed up house prices by 8.5% on average, according to latest figures from the Office for National Statistics.
In January, the cost of an average UK house dropped by 0.3% compared to December, to £251,968, according to Halifax.
The slow down follows a stark warning from mortgage brokers Trussle that around half of property deals agreed in November won't make the deadline.
House prices could fall
Halifax predicts property prices will fall by between 2% and 5% this year, while Zoopla expects valuations to peak by 5% in February before slowing to 1% at the end of 2021.
Calls for an extension
Industry bodies have been calling on the Chancellor to extend the stamp duty break to stop thousands of house sales from falling through.
Rightmove warns there's an estimated 412,000 sales that were agreed last year still currently in the legal process putting them at risk of missing the deadline.
Yesterday, The Sun reported Mr Sunak could extend the stamp duty holiday by six weeks in a boost for home buyers.
But the Chancellor is said to oppose a longer, six-month extension amid concerns over Britain’s growing deficit.
Rightmove's property expert Tim Banniester said a six-week extension "should give the majority of sales from last year the chance to complete in time."
However, Trussle's head of mortgage Miles Robinson warned the extension wouldn't be long enough for buyers just starting on the process to cash in.
He said: "Whilst their mortgages might be approved before the deadline, the current wait time for other necessary processes, such as surveys, valuations and local searches are likely to take longer."
"As the wider economy continues to recover from the coronavirus pandemic, we’d urge the Government to consider granting a longer extension or adopting a tapered approach to ending the stamp duty holiday," he added.
Mr Sunak isn't expected to announce a decision on an extension until the Spring Budget in the first week of March.
Property prices fell for the first time in eight years by 0.1% in July 2020 following the pandemic lockdown.
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First-time buyers are already exempt from stamp duty on the first £300,000 of a property value.