There was enthusiasm to purchase property when the Stamp Duty Land Tax holiday was declared in 2020. There was apprehension as the closing date of the holiday on 31 March 2021 approached. There was a relief when the Budget was declared, announcing the SDLT holiday extension till the end of June, phasing out to the end of September 2021. This was welcomed by buyers, sellers as well as real estate agents! It can be confirmed by many of them, including the estate agents in Buckingham, where both apartments and detached houses are available for sale.
However, careful consideration should be given as to whether now is the right time to purchase a house.
SDLT holiday extension:
Pros: Yes, the benefit of tax saving on property purchases is enormous. The extension allows no tax on properties priced at up to GBP 500,000 till the end of June 2021 and then no tax on properties costing up to GBP 250,000 till the end of September 2021.
Cons: Property prices will rise as a consequence. And you may end up paying more for a property even with the tax benefit than it would cost without the SDLT holiday extension. If you are a first time buyer, wef 1st October 2021, stamp duty is not payable for properties priced up to £300,000 and 5% for those within the £300,001 to £500,000 bracket. So the holiday extension would not really benefit such buyers.
Delays in documentation:
Pros: The tax holiday extension is a significant relief for many who had applied earlier but whose documentation had not been processed due to delays caused by the pandemic and lockdowns. This new time frame gives them additional time to complete the procedure, which had been delayed due to no fault of their own.
Cons: The delays in processing documentation, including applications, conveyancing, mortgaging, will continue to rise, as more people will want to take advantage of the Tax holiday extension and purchase properties. Also, with the cladding crisis, some lenders are insisting on verifying the fire safety of a building with an EWS1 (External Wall Fire Review) form before agreeing to a mortgage. This could cause a further delay in clearing documentation. Caution should be applied, especially to new applicants, with a long time vision of whether or not their applications can be processed within the given time.
95% mortgage guarantee:
Pros: The government’s offer to buyers, with effect from 1st April 2021, to pay only a 5% deposit on property up to £600,000 is an excellent incentive for a prospective buyer. It also offers a certain degree of protection to the lender.
Cons: With such a low deposit, finding competitive mortgage rates will be difficult, and lenders will want to make the most of this by offering high interest deals. Also, with a low deposit, it could take a much longer time to pay off the mortgage and interest rates could also fluctuate. Another factor to take into consideration is negative equity. If house prices dip and your home’s value goes below the balance you have to pay on your mortgage, you will be in negative equity. This could be an issue if you want to sell or remortgage your house.
Covid vaccine and probable lift of lockdowns:
Pros: With the onset of the Covid vaccine programme and a hopeful return to a normal life pattern once lockdowns are lifted, there is a prediction that there will be a fall in house prices. Once schools, offices, restaurants and entertainment centres reopen, more people may return to city life and sellers will be open to offering their properties. Thus, the supply will improve and become more competitive, leading to a drop in house prices.
Cons: Demand has always outweighed supply in the UK property market. With the return of a routine and people moving back to urban living, property prices could rise in the cities, both for buyers and tenants.
Final end of SDLT holiday:
Pros: When the tax holiday extension finally comes to an end, many people would have achieved their goal of purchasing properties. Consequently, there will probably be a slight downward trend in property prices in the last quarter of 2021.
Cons: Alternatively, if the economy recovers sufficiently towards the end of the year, it will affect the property market as well, and prices could level off or even rise.
Conclusion: The unpredictable future makes it impossible to say whether or not you should buy a house now. One of the main factors is whether it is essential for you to buy a house immediately or whether you could wait for some time. Another is, of course, your budget and credit rating. The final decision is up to you, though an experienced real estate agent’s expertise could be invaluable in guiding you to make that decision.