A new stamp duty deadline has been set by the Chancellor as part of measures he announced in the Autumn Statement.
Jeremy Hunt said he would keep the stamp duty changes introduced by his predecessor Kwasi Kwarteng in September, which saw the threshold under which no stamp duty is paid raised from £125,000 to £250,000 – but only until March 2025.
The move creates a new stamp duty deadline, which is something that has not historically worked well for the stability of the housing market.
This is because buyers rush to meet the deadline, with property transactions ‘dropping off a cliff’ immediately afterwards.
Jeremy Hunt said he would keep the stamp duty changes introduced by his predecessor – but only until March 2025
Commentators have reacted to the deadline saying it would push some buyers – particularly first-time buyers – to rush their decisions, and that it would create a ‘bottleneck’ of transactions in early 2025.
With the total time that it takes to buy and sell a property being currently around six months, it means that buyers will need to be well into their moving journey by the end of summer 2024.
The deadline may hit some first-time buyers badly as they will now have less time to save for a deposit.
Property website Rightmove said the the clock was already ticking for buyers who wanted to benefit from the stamp duty savings, particularly for first-time buyers who typically take up to five years to save up enough for a deposit.
Tim Bannister, of Rightmove, said: ‘The clock now ticking on potential stamp duty savings will bring a bit more urgency for people trying to get on the ladder or trade up in the next few years.’
There is also concern about what happens once the deadline is reached as historically, the market has fallen off a cliff once any type of stamp duty ‘holiday’ comes to an end.
Richard Campo, of broker Rose Capital Partners, said: ‘Putting a deadline on the Stamp Duty changes is a really bad idea. The only good thing that came of the infamous mini-budget was that the stamp duty allowance wasn’t time limited.
‘What always happens when you create a deadline? It creates a rush to hit the deadline which pushes up prices artificially, and also, what comes next? Going back to the current scheme or not? That wasn’t mentioned so the devil will be in the detail here.’
What is stamp duty and how does it work?
Stamp duty land tax – as it is officially known – is charged on the purchase of a property or land over a certain price in England and Northern Ireland.
The lowest thresholds at which it is charged were raised by the previous Government.
The threshold had been at £125,000, but the former Chancellor Kwasi Kwarteng announced in September that this would double to £250,000.
At the same time, the threshold for first-time buyers was raised from £300,000 to £425,000.
Today, the new Chancellor Mr Hunt said that these changes would only last until March 2025.
The deadline is likely to be most challenging for first-time buyers as it takes them an average of five years to save up enough for a deposit, says Rightmove
Rightmove’s Mr Bannister added: ‘We may see a jump in new sellers towards the end of next year and into 2024 to ensure they can move in time. The total time it takes to buy and sell a property is currently around six months, meaning people will need to be well on their way by late summer 2024.
‘It’s likely to be most challenging for first-time buyers with smaller deposits, as we know it’s currently taking them an average of five years to save up enough for a deposit.
‘The average monthly mortgage payment will be lower if they’re able to raise a bigger deposit, so we may see more people looking to friends and family for help with a deposit to be able to bring their plans forward before the current stamp duty savings disappear in 2025.’
Nick Leeming, of estate agents Jackson-Stops, said: ‘Reversing the cut to stamp duty on properties under £250,000 and £425,000 for first-time buyers is unwelcome news for the housing market.
‘Perhaps one of the only positives to come from the ill-fated mini-budget, the decision to put a time limit on the tax break is likely to create a bottleneck of transactions in the first quarter of 2025 as buyers rush to lock in the more favourable stamp duty rate.
‘While this rush to get a sale across the line will not be to the same extent seen during the last stamp duty holiday, this time limit will undoubtedly factor into many first-time buyer’s decisions as these savings could be put towards utility bills, solicitors’ fees or upgrades on the home they purchase.’
Mr Hunt’s stamp duty announcement was part of a wider package of measures affecting the housing market, which included council tax hikes, changes to capital gains tax and a social rent cap.
And Sarah Coles, of Hargreaves Lansdown, said: ‘Property buyers will have been thrown into a quandary by the announcement on stamp duty. Right now, the market is sending out every possible signal that they might want to hang fire, because we could be reaching the peak. So it will make their decisions even harder now that Jeremy Hunt has warned them if they wait too long, they’ll end up paying more stamp duty.’