Will the housing market go into lockdown? Will the stamp duty holiday change if it does?
Shutting the housing market will render the stamp duty holiday worthless, cause distress and push up prices, according to industry experts.
Estate agents and lenders are also warning of the dire impact on the wider economy of suddenly halting transactions.
Uncertainty is mounting with some scientists and politicians including Labour leader Keir Starmer calling for the Prime Minister to put house sales on hold.
Within the last 48 hours the Mayor of London Sadiq Khan has waded in, asking Boris Johnson to review essential retail, including estate agents.
Health Secretary Matt Hancock has “not ruled it out” but Chancellor Rishi Sunak has robustly defended the decision for the property industry to remain open.
Speaking to Homes & Property, Shaun Bailey, the conservative candidate for the Mayor of London, warned: “The housing market is a hugely important part of London’s economy so any decision to close it should not be taken lightly.”
Will the stamp duty holiday be extended?
The Chancellor introduced a tax break for all homes worth less than £500,000 in his emergency summer budget last July. Buyers will save £15,000 above the threshold and pay no stamp duty below it.
But for those in the middle of buying a new home the sudden closures of the market could delay their completion until after the stamp duty holiday deadline of March 31, 2021, or even wipe out the sale entirely.
“Although we all understand the reasons behind such a move, closing the housing market once again will have serious consequences for many homebuyers, especially for those in a chain or desperate to move,” says Andrew Montlake, managing director of Coreco Mortgage Brokers.
When the housing market was closed last spring for eight weeks valuers could not do their jobs and transactions ground to a halt, he explains.
“Add into this the stamp duty deadline and you will have a whole host of people contracted to or needing to move by a certain date and unable to do so,” he says.
If the housing market has to close the Chancellor must consider moving the stamp duty deadline, says Tom Bill, head of residential research at Knight Frank.
“It will also have a knock-on effect on the economy stopping all industries associated with moving house,” he adds.
‘People must be allowed to move house’
Estate agents are deemed to be essential workers due to the very personal need to move house and the fact it is impossible to work from home.
“People are mid-transaction and making the biggest purchase of their lives. Coping with lockdown life is stressful enough without the added turmoil of a stalled or failed purchase or sale,” says Becky Fatemi, founder of Rokstone Properties.
“Some are trying desperately to move out of unsuitable accommodation or, in the case of domestic violence, into a safer situation. For some people who are trying to move into rental accommodation closing the market could mean they have nowhere to go.
“The industry must continue to be ultra-responsible and people must be allowed to move house.”
The potential closure of the housing market also renders millions of tenants and landlords vulnerable with no one allowed to perform essential checks or carry out vital maintenance.
“If safety checks are banned then this will invalidate household insurance for property owners and renters at great personal expense,” adds Fatemi of Rokstone.
Will house prices crash?
Prices are unlikely to collapse, so says Knight Frank’s Tom Bill, as both supply and demand will stop in unison if the market closes.
However, as seen in the full national lockdown last spring it will cause a swell of pent-up demand and a rush to buy when it re-opens, pushing up prices once again and cranking up the affordability crisis in cities like London.
“If the market closes it will cause turbulence in the short term,” says buying agent Alex Goldstein. “By forcing buyers to again consider their homes, lifestyles, work-life balance and schooling, we will see another surge in activity once restrictions ease.”
Montlake agrees: “It will cause another period where pent-up demand grows only to explode upon re-opening causing bottlenecks and potential price rises.”