The extension of the nil rate band for SDLT to £500,000 yesterday in the chancellor's mini budget was pretty much welcomed all round, but mainly because the market was in a bit of a spin due to the leak that had suggested the SDLT cut would form part of the Autumn budget. Interventions of this nature must be immediate or they will affect demand.
The promise of an SDLT cut later in the year would have taken all of the heat out of the current market and as, anecdotally, agents have been reporting very high activity, it didn't seem that crucial to the bounceback. Being bounced into delivering the SDLT holiday ahead of schedule might now have some unintended consequences.
The period for the SDLT "holiday" up to £500,000 on a main residence will last for nine months. This does not actually give housebuilders that much time to gear up their construction programmes to deliver completed homes before the cut off date, so shouldn't help the new build market that much. Some housebuilders have already voiced concern over the cut off date clashing with expiry of the Help to Buy scheme. As Sunak announced the 31 March 2021 date, I have to admit it was the first thing that I thought. Double whammy for housebuilders. Even pre-COVID there was concern over the Help to Buy scheme expiring so this could create a perfect storm and see demand drop off overnight.
This is the problem with market interference - it's a drug we need weaning off. If we go cold turkey it could trigger more interference in Spring 2021.
There are also concerns that this giveaway does not really change some fundamental problems with the property market/housing in the UK: (1) sales are dependent on the availability of mortgage products; (2) sales are dependent on elderly people leaving family homes and there is a shortage of later living accommodation; and (3) how on earth do young people save a 20% deposit?
Add to this that many buyer's personal circumstances over the next nine months might change but they don't know it yet. A potential £15k SDLT saving does not make up for the fact that your job no longer exists.
In the short term, the announcement helps us get some discretional spend washing through the economy (and as I said to my plumber yesterday, he will be busy as the SDLT savings convert into home improvements such as heating upgrades and new wet rooms). As with all of these interventions, we are pretty much unanimous that they are needed.
What else can governments possibly do but throw money at this bizarre situation? Where can they go from here? Extend Help to Buy? Give commercial real estate an SDLT holiday too?
Well one idea is that they could scrap SDLT altogether? Now that would be a bold idea!
Sunak’s plan welcomed but fears remain