The Government could cut stamp duty for six months on homes up to £500,000 to help boost Britain’s struggling housing market.
Homebuyers currently pay stamp duty on properties worth more than £125,000, with a 3% rate on properties worth up to £250,000 and 5% on properties up to £675,000.
The Times reports that Chancellor Rishi Sunak could raise the threshold to encourage more housing transactions.
The new threshold is expected to be set between £300,000 and £500,000 and would remain in place for six months.
First-time buyers are already entitled to relief for the first £300,000 of stamp duty on properties up to a value of £500,000.
This means a majority of homebuyers will not have to pay any stamp duty at all.
It is expected Sunak will announce plans to lift the threshold as part of his economic update in the Commons on Wednesday. However, it is understood the policy will not be introduced until the Autumn Budget.
When the lockdown was introduced in March, estate agents, buyers and surveyors were banned from visiting properties, bringing the housing market to a grinding halt.
According to the Nationwide house price index for June, house prices fell by 1.4%, or £2,500, to an average £216,403.
Figures from HM Revenue and Customs (HMRC) show that 48,450 properties were sold in May, down nearly 50% compared to the same time last year when 96,050 homes were sold.
The data from HMRC shows that property transactions have fallen to levels not seen since the peak of the global financial crisis.
Demand for homes is expected to weaken further over summer and into autumn due to mortgage lenders pulling loans for first-time buyers and more people losing their jobs as the economy worsens.
Economists believe the impact of the lockdown on incomes will continue to weigh on the market for the rest of 2020, with some predicting house price falls of up to 13%.
However, there are fears that if plans to raise the stamp duty threshold are put off until later in the year the market could be brought to a halt.
Jeremy Leaf, north London estate agent, warns that buyers and sellers will defer transactions until the stamp duty holiday is introduced, killing off the growing increase in activity since lockdown restrictions were eased.
He says: “More transactions are not just good for the property market but have far-reaching benefits for the wider economy by improving job and social mobility in particular. I would like to see help targeted at first-time buyers, the life blood of the market, who tend to trade up regularly as opposed to investors who buy at lower levels and usually stay there.
“First-time buyers are the group most nervous about job prospects as government support from furlough draws to a close so the area of the market which needs most assistance. On the other hand, stamp duty changes in 2014 aimed at the top end have had implications for all price ranges.”
Moneywise. (2020, July 6). Government mulls stamp duty holiday to boost housing market (RSS). Retrieved from https://www.moneywise.co.uk/news/2020-07-06/government-mulls-stamp-duty-holiday-boost-housing-market