The stamp duty holiday introduced in the first half of 2020 has finally come to an end but was it a success?
As a house builder, anything that incentivises customers to buy is a good thing, surely? Well, that is probably true but at a cost of around £4.7bn to the taxpayer did it represent value for money?
One argument is that it was totally justified as a wider economic stimulus. When people move house they spend money on sprucing up their existing property ready for sale, on estate agents, solicitors and removers and then spend again on their new property when they move in. All of this creates demand for goods and services in related industries, and increases HMRCs VAT receipts in the process.
The counter argument is that it just wasn’t necessary. The housing market boomed the moment the first lockdown was lifted and predated the stamp duty holiday. The removal of SDLT below £500k simply fanned the flames of an already red hot market. The effect was that demand significantly outstripped supply of both new and second hand homes and pushed up prices by as much as 20% in certain areas and at an average of 10% across the UK. This moved property further away from first time buyers.
Regardless of which point of view you align yourself to, the pandemic has limited house builders’ ability to fully capitalise on the upsurge in demand. Builders have been forced to build more slowly as a result of lockdowns, social distancing requirements on site and disruption to supply of key building materials. Many are 6 to 9 months forward sold and have very little to offer customers who want to move quickly.
The net effect of the pandemic was a reduction of 19% in new homes completed by the largest 25 house builders in the UK during 2020. That is a drop from 110,000 homes to just over 90,000. It’s noteworthy that many builders are expecting their 2021 output to recover to 2019 levels.
Rather than reflecting on the past perhaps it’s more worthwhile to consider the immediate future. Has the stamp duty holiday brought forward purchases that would otherwise have happened over the next twelve months leaving leaner times ahead? Or was it the case that the tax break incentivised people to move who simply wouldn’t have done at any point therefore simply boosting the overall sales number?
My contacts still tell me that buyer demand for homes is outpacing supply. And that demand is supported by high levels of mortgage availability, rock bottom interest rates and strongly recovering employment statistics. For now, it appears the house building market can cope perfectly well without SDLT breaks.