After booming in early 2020, the UK property market was severely affected by COVID-19’s first wave.
Aside from concerns over steep recessions and job losses, strict lockdown made it almost impossible for people to physically view properties, carry out property surveys and complete transactions. Many sales were delayed or collapsed entirely.
Announced in July 2020, the Government’s stamp duty ‘holiday’ was intended as a major boost to the UK’s property market.
The holiday appears to have worked, triggering a surge in transactions. However, significant delays occurred almost immediately. Many parties, including solicitors, lenders, surveyors and local authorities have struggled to cope with the ever-growing backlog, with staff working from home or in socially-distanced environments with reduced office support.
How does the stamp duty relief work?
Prior to the announcement of the cut in Stamp Duty Land Tax (SDLT) rates in July 2020, any property purchase above £150,000 incurred stamp duty, unless the purchaser was a first-time buyer.
SDLT rates were calculated on a sliding scale, with a 0% rate payable up to £125k, 2% between £125k and £250k, 5% between £250k and £925k, 10% between £925k and £1.5m and 12% above £1.5 million.
Under the new SDLT ‘holiday’ rate, there is no stamp duty to pay whatsoever for properties sold for £500,000 or less. For properties over the £500k threshold, the rate remains as before, but the holiday still represents a saving of £15,000.
Higher rates still apply for owners of more than one property, unless they are replacing their ‘main residence’.
When will the stamp duty holiday end?
At the time of writing, the Chancellor’s SDLT relief is set to end on 31st March 2021. This means that the standard (pre-holiday) rate of Stamp Duty Land Tax will be due on transactions that do not complete before 1st April 2021.
The current SDLT threshold of £500,000 will drop back to £125,000. This means the buyer of a £500,000 property must find an additional £15,000 to fund their transaction. The threshold will remain at £500,000 for first-time buyers.
Despite growing pressure from professional bodies like Propertymark, Chancellor Sunak has denied requests for the deadline to be extended.
Running out of time
The property market is currently experiencing an unprecedented volume of transactions, as home movers who have delayed their transaction due to Brexit-related uncertainty and lockdowns flood the market before the stamp duty holiday ends.
At the same time, many property professionals are running at reduced capacity. Support staff at solicitors’ firms and local authorities have been furloughed or let go. Many staff are working from home in sub-optimal conditions. The aftermath of the first lockdown triggered a surge in requests (including for property searches, leasehold managing agents’ packs, surveys and mortgage applications) that the industry is yet to recover from.
Many transactions are now taking much longer than ‘normal’ to complete, with delays possible from multiple sources. Fortunately, there are still several tricks that sellers and buyers can apply to sidestep some delays, minimise the effect of others, and keep their transaction moving forwards.
Advice for buyers
Instruct a solicitor. Buyers often wait until they find a property and have their offer accepted before instructing a solicitor. There is no reason to do this. By instructing a solicitor early, you can get the initial paperwork, like ID verification, out of the way. If you also have an agreement in principle (AIP) from a mortgage lender, you can check that your chosen solicitor can act for your lender.
Order the searches and survey ASAP. Once your offer is accepted, you should ask your solicitor to order property searches immediately. Search backlogs, particularly for local authority searches, are causing serious delays, and these delays are likely to worsen as the March deadline approaches. The recent second lockdown has also made life difficult for surveyors and it may take weeks to book a survey.
Follow up and ask for updates. Whenever you reply to a question or request, if you don’t receive confirmation, you should check that your reply has been read, and that your response is sufficient. Many conveyancing firms are juggling a very high caseload in difficult circumstances, and there is the potential for an email or callback request to be missed.
Advice for sellers
Instruct a solicitor early. Much of the conveyancing work on the sale side (such as filling out property information forms and preparing the draft contract) can be carried out even before a buyer is found. There is no reason not to instruct your solicitor as soon as possible, complete the TA forms and get the draft contract prepared ASAP. If you are selling a leasehold property, you should also ask your solicitor to source the managing agents information. This paperwork can often take weeks to obtain.
Above article written by Chris Salmon of www.quittance.co.uk