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Failed Sales fear as Stamp Duty Holiday cliff edge approaches

A large majority of estate agents fear a surge in 'failed sales’ as the stamp duty holiday cliff edge gets ever-closer.

The latest National Association of Estate Agents Propertymark market snapshot comes with a warning from chief policy advisor Mark Hayward that: “We are increasingly concerned about the pressure … on the property industry with 69 per cent of estate agents expecting to see an increase in failed sales due to buyers realising their sales will not complete ahead of the deadline. It’s important that action is taken now to prevent this and support the property sector.”

His call for action comes as the online petition calling for an extension to the holiday passes another critical milestone - the 125,000 mark - and the government finally agrees to a Parliamentary debate, which will be at 4.30pm on Monday, February 1.

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In the meantime, property professionals continue to warn of dire consequences of a cliff edge, and one veteran agent is suggesting the government’s apparent intransigence over an extension could even cost it revenue in the long term.

Agency owner and PropTech entrepreneur David Alexander says in his area - Scotland - the stamp duty equivalent, Land and Buildings Transaction Tax, would actually bring in more money to the Scottish Government if its current holiday was extended.

He says the Scottish Government’s latest figures show that LBTT revenues from Q4 2020 - when the holiday was in full swing - have increased by £38.2m which is a 32.1 per cent year on year rise compared with the final quarter of 2019. 

The figure for last month alone rose by 44 per cent which was £18.4m more revenue than the equivalent number for December 2019.

This is because, just as in England with stamp duty, the LBTT holiday has triggered such a large increase in purchases that the 'no duty' holiday effects are negated for the Scottish Treasury.

“These figures show that reducing the tax level paid on residential housing transactions has actually substantially increased the revenue the Scottish Government has received. A near 50 per cent year on year increase in revenue during December, at a time when there are few signs of growth in the economy, cannot be ignored” says Alexander, who is joint chief executive of the apropos PropTech platform. 

“The reduction in LBTT, effectively forced on the Scottish Government by the actions of Rishi Sunak lowering stamp duty in the rest of the UK in July, has resulted in substantial increases in revenue at a time when it is most needed to restart the economy after Coronavirus” he continues.

“At a time when the Scottish economy needs as much financial support as it can get wouldn’t it be sensible and financially advantageous to continue with the stamp duty threshold starting at a higher level into the future since it is clearly raising more funds which can be used to pay for the NHS, education, and kickstarting economic growth.

“Indeed, there is a case for easing the rates at all levels. The Scottish government has previously insisted on maintaining higher tax rates compared to the rest of the UK for first time buyers, investors, landlords, and properties above a certain value. 

“At a time when there has never been a greater need to maintain the financial stability of Scotland, isn’t now the time to reconsider this policy in favour of higher returns over political posturing targeted at its voter base.”

Yesterday we reported that an accountancy firm, Hillier Hopkins, has called for the government to, as a minimum, extend the stamp duty holiday to those properties that have exchanged but yet to complete, or even better, extend the holiday through to September.

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    When are we going to realise that any extension to the SDLT holiday will only prolong the problem? The holiday ends March 31st. Extend it to September (as the article suggests) will create the same problems then. The only solution is to phase the scheme out - typically by setting a (past) deadline by which time a certain point must have been reached in the sale process and then the benefits of the holiday will apply to that transaction (Much like the furlough scheme last march - Announced in March, but you had to be employed on 28th Feb to qualify). I totally agree something MUST be done, or it will be a bloodbath and undo all the good work the scheme has achieved so far.

  • Stephen Hayter

    I agree with the phasing out of the scheme. The stress that is currently being experienced by all stakeholders will only be repeated if we have an extension date (another cliff edge). I also understand and agree with a verifiable point in time being a potential point of qualification, but I do repeat the word verifiable, and here lies a problem.

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    Phasing is the most sensible solution to ensure that huge levels of sales do not fall through. Post completion spending by homeowners ( furnishing, white goods, utilities ) will be an enormous shot in the arm for many businesses at a time when they need it most. It would further dent the economic recovery if these sales fell through.

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    Guys when you received notice of the 6 month holiday, who didn’t also realise it was 6 Months notice of its end!
    Instead you have abused this benefit to your own end and now you are whining about it and as said above kicking it down the road including mr Hayward who should have warned his members of exactly this case.

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    • N W
    • 27 January 2021 09:54 AM

    not so true.

    Most of us realised the end date and the fact that this would need to be managed (I'm lucky that most of my sales are well on course for exchanging and completing prior to the deadline date by diligence, careful management, setting the scene with buyers and sellers and ruthlessly managing the pipeline) Those that may be tight for meeting the deadline are aware (we put them on notice at the time) that due to the volume of sales being agreed we could not guarantee they would meet the deadline (I may have 3/4 that might struggle to get over the wire in time).

    The issue is going to be those sales that should have exchanged and completed prior to the date not being able to as the legal process, surveys, finance etc has become so backlogged (beyond what almost anyone could have predicted) and the biggest issue of all which no one seems to have considered i.e. that there are not enough removal companies in the UK to cope with the volume of house moves that will be trying to take place in the last 2/4 weeks and as a result whilst buyers and sellers may be legally able to exchange and complete they wont be able to set a completion date as they wont be able to get removals.

    the common sense thing is to tapper any relief to ease this problem or to allow anything that exchanges in March to have a delayed completion to facilitate removal companies being able to cope with the volume.

    removals is going to be perhaps the biggest issue that most people will not have planned for and the one that is likely to cause the greatest number of sales that should exchange and complete in time not being able to do so purely due to the logistics

     
  • Sally Holdway

    I am hearing anecdotally that a lot of transactions are proceeding on the basis of a simultaneous (or very close) exchange and completion, so I fear that if the deadline was moved to exchange rather than completion, there wouldn't be a huge proportion of transactions that would benefit.

  • Matthew Payne

    How does a full unconditional extension of 6 months have any credibility when covered in the thinnest veneer of being concerned about deals not completing in time? It's simply asking for a second stamp duty holiday all over again. Copy and paste in September, can we have 3rd?

    There are some valid reasons for providing a tight and conditional extension to a modest % of oven ready deals that may have ordinarily completed by the end of March or cannot physically get moved even if they do so, for example extend the completion deadline for 4-6 weeks but only for deals that have exchanged by the end of March, or 7th April perhaps to give lawyers a bit of extra time to execute those genuinely ready transactions.

    As Stephen, suggests, I don’t see how any other measure of self-certification of substantial progress would work. It would become very labour intensive at a time when the focus should be on the deals themselves and would be open to widespread abuse creating another log jam at any new deadline.

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    For the English Counterparts, THE LBTT in Scotland is 5% and with the initial banding of £145,000 removed and set at £250,000. Over this amount £250,001 up to £325,000 the rate is 5% and thereafter £325,000 up to £750,00 rate of 10% and any purchase over £750,0001 = 12% rate.
    The second fundamental difference is that this tax applies to commercial property too and therefore is included in any revenue figures.
    The total amount of revenue raised in 2019 was £591m versus £512m collected in 2020 despite the increase in the rate.
    The second half of 2020 "The BOOm" raised £327m v the H2 of 2019 that raised £336m
    Not sure what increase Mr Alexander is talking about, save some hyperbole of short term analysis that often pervades this industry
    Just to put the Revenue stream into perspective £336m in Scotland V £11.8bn in England in 2019.
    "One swallow doth not a Summer make"

    I hope Mr Alexander when planning his Agency business takes a longer term view than last month two months and bases his decisions on more than phrases of nearly 50%

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