In the first three months of 2021, 100,000 extra house sales are predicted to take place as buyers hurry to complete their purchases before the stamp duty holiday ends.
According to the property site Zoopla, the number of new house sales being agreed is 38% higher than it was last year, with a busier housing market before Christmas than we have seen for over a decade.
Pent-up demand for houses following the first UK-wide lockdown began the surge in house sales. There is also a rush to purchase before the stamp duty holiday on properties in England up to £500,000 ends on 31 March 2021 and before changes to Land Transaction Tax in Wales on the same date.
Residential property transactions surged by 10% in October compared with the previous month, with more than 105,000 transactions, and were 8.1% higher than October 2019 according to HMRC.
Will I be able to buy a home before the stamp duty holiday ends?
The current English stamp duty holiday waives Stamp Duty Land Tax (SDLT) on the first £500,000 of any home purchase on a property in England. This can potentially save buyers up to £15,000.
While it is predicted that an extra 100,000 home sales will take place in January 2021, Zoopla has said that maybe only half of the deals agreed in January will finalise before the 31 March 2020 when the stamp duty holiday ends.
Anyone looking to complete a house sale or purchase during this period should be warned that high demand has caused delays in the process, and they might not be able to complete their purchase before the March deadline.
What about Land Transaction Tax in Wales?
From 27 July 2020, the nil rate band for Land Transaction Tax (LTT) on Welsh residential properties was temporarily increased to £250,000 from the previous limit of £180,000.
This means Land Transaction Tax was only charged on properties worth in excess of £250,000 and, for properties over this price, LTT was only charged on the value of the property above this threshold.
However, in the Welsh Government’s draft budget, released on 21 December 2020, it was announced that the temporary nil rate band increase would end on 31 March 2021. The threshold for paying LTT will thus revert to £180,000 for all Welsh residential properties.
The LTT rates will also be increasing from 31 March 2021, adding to the cost of buying a residential property in Wales.
This means that, as in England, there is likely to be a rush of people trying to buy before the 31 March 2021 when the Land Transaction Tax changes come into effect.
Will the housing boom continue once the stamp duty holiday has ended?
Figures from Zoopla suggest that house purchase completions will be 20 to 30% lower than normal levels in the three months after April 2021, due to the distorting effect of the stamp duty holiday. These figures have further suggested transactions will be 10% below 2019 levels from the three months after April until the end of 2021.
The desire to trade homes for something better and the stamp duty holiday and LTT deadlines have also increased house prices. Halifax reported prices had risen 7.6% annually at the end of November, a month-on-month increase of 1.2%. Also, the gain in prices over the five months following June 2020 was the strongest period since 2004.
Taking all this information into account, buyers must decide whether purchasing a house right now, and taking their chances on meeting the 31 March 2021 deadline, is the right way to go, or whether they should wait until the market settles throughout the rest of 2021.
Should I wait until after the stamp duty and LTT deadlines to buy a house?
There are various theories on whether now is the right time to buy a house a home in England or Wales, or if you should wait until the stamp duty and LTT holidays have ended.
In their eagerness to meet the March deadline, buyers might end up paying more for a house in Q1 of 2021 than they would in the remaining three quarters. Therefore, paying a premium for a house now could leave you with a property that declines in value in the latter stages of 2021.
Other theories have suggested that purchasing a house before March 2021 is the right move. Waiting until prices fall could encourage sellers take their properties off the market, limiting the choices available to buyers from April 2021 onwards.
Another factor to consider is that, for first-time buyers, waiting until after the holiday deadline could erode their purchasing power. This is because, the longer they wait, the more rent they pay and the more money they lose.
Get advice on your residential property transactions from expert conveyancing solicitors
If you are thinking of purchasing a house in the early stages of 2021, it is imperative that you seek advice from expert conveyancing solicitors, like hpjv, who can make sure your sale goes ahead as quickly and smoothly as possible.
Get in touch with our specialist conveyancing solicitors in Newport for effective guidance and support on your property transactions before or after the stamp duty holiday deadline.
Give us a call or fill in our simple online enquiry form to speak to a member of our conveyancing team.
