The stamp duty holiday can be a time bomb

Hargreaves Lansdown has urged buyers not to rush to move due to the stamp duty holiday as it is causing short-term price inflation.

The Halifax Home Price Index put inflation at 7.3% in the year through September, while home sales increased 21.3% in the same month.

“The stamp duty holiday has been a great success, but it also brought many risks to the market.”

Sarah Coles, a personal finance analyst at Hargreaves Lansdown, said: “The stamp duty holiday has prolonged the mini-boom, but the market risks becoming a victim of its own success.”

“The short-term stamp holiday means buyers are rushing past the March deadline, and demand is booming. This is inflating prices in the short term because it is a seller’s market, and buyers can spend the extra money that they would otherwise have set aside for taxes.”

“The costs are also increasing. Mortgage companies capitalize on the boom by raising interest rates across the entire range of products and adding higher fees. There may also be additional costs caused by delays in the buying and selling process.”

“The demand boom has overwhelmed the system, so this is taking much longer. The more delays there are, the greater the risk of failure, and when the chains start to break, buyers risk losing thousands of pounds on failed purchases.”

He added: “Buyers may not be concerned about rising prices and costs as long as there is some momentum behind the market, but this is not going to last forever.”

“As government support for the coronavirus becomes less generous, it will eventually affect jobs, confidence, and house prices.”

“Banks are already worried about house prices as we move towards the end of the year, so as we approach the end of the stamp duty holiday, we may well see some more significant drops.”

“This does not mean that everyone should stay away from the housing market. If you need to move, can afford the home you want, and expect to stay there for a significant period, you shouldn’t let market worries trap you in the wrong home.”

“However, this is not the time to rush into a decision that you are not entirely satisfied with for the sake of a tax break.”

Although the stamp duty holiday is scheduled to end after the first quarter of 2021, experts believe that may be what prompted the long-awaited property market crash.

HICH LTD offers the best property survey service before, during, and after the pandemic. We have redoubled our efforts to maintain the quality standard that has made us a leading property survey company.

Want a Building Survey? Request it here!

Follow us on our social networks to keep up to date with the most relevant property market news, tips for being a responsible homeowner, and much more!

Twitter: @HichLTD

Facebook: HICH-LTD