Next Wednesday, Rishi Sunak will take to the despatch box to give his second budget as Chancellor of the Exchequer.
We will then have confirmation as to whether – as reported in today’s papers – there will be a three month extension of the stamp duty holiday in England and Northern Ireland (to the end of June), that, subject to the detail, could have the dual effect of:
• providing a greater opportunity for people who have already agreed to buy a home to complete their purchase; and
• giving ongoing support to the housing market while the government implements its four-point plan to ease Covid-19 restrictions.
That is likely to influence how the parliaments of Scotland and Wales view their own measures to support the housing market.
It coincides with news from the ONS that unemployment has reached a five year high of 5.1% in the three months to December 2020, a timely reminder of the likely headwinds facing the economy in the coming months.
Strong activity in the housing market
• It also follows the release of figures from HMRC underscoring the high levels of activity in the housing market over recent months. The numbers suggest that 98,830 housing transactions completed in January, some 21% higher than the average for the same month over the past five years.
• The same data shows that there were 69,800 more transactions in the past four months than during the same period a year previous.
• This said, given the number of sales being agreed at the back end of last year and reported levels of mortgage approvals, we might have expected the January numbers to have been even stronger.
What does this tell us about the impact of the stamp duty holiday?
• That tells us two things. First, the stamp duty holiday gave a strong sense of urgency to the market at the back end of 2020. Second, if the stamp duty holiday is not extended many buyers who have agreed purchases will find it difficult to meet the deadline.
• There is also some evidence that the previous expectation that the stamp duty holiday would end on 31 March, tempered new buying activity in parts of the market in the first two months of this year.
• Data from TwentyCi shows that in the second half of 2020 agreed sales were about 50% higher than in the same period of 2019.
• Agreed sales in January remained 20% above that benchmark, supported by strong activity at the top end of the market. The constraints of the third lockdown coupled with the prospect of missing the stamp duty holiday appear to have taken some of the urgency out of the mainstream market.
• All of this indicates that extending the stamp duty holiday would not only reduce the risk of a further slowdown but also should support demand and much needed supply in the prime markets through the all-important Spring market.
In other news
• There is continued speculation that the Chancellor might set out capital gains tax rates in line with income tax rates.