THE STAMP Duty holiday has created a series of “major pitfalls for inexperienced buyers”, claims an expert, who says price inflation is “unlikely” to stop after June.
Pitfalls to stamp duty holiday
The stamp duty holiday extension, which began in July 2020 and was extended in March 2021, has seen prices remain buoyant over the last few months. While this has seen vendors receive good money for their homes, and buyers save money on stamp duty, a property expert has warned that there are “pitfalls” to the holiday. Ray Harriot, CEO at Reliable Property Group, told Express.co.uk that the SDLT holiday makes it difficult for buyers to know whether they are getting a “good deal” on a property.
He explained: “While the stamp duty extension and the introduction of 95 percent mortgage schemes all look beneficial for buyers, these measures have created some major pitfalls for inexperienced buyers to topple into.
“In most cases, the potential stamp duty savings have been added to asking prices and this inflation is unlikely to simply stop after June, making it difficult for buyers to calculate whether they are getting a good deal on the property.”
The property expert also said levels of “gazumping” have increased thanks to the property tax holiday.
Gazumping is when another buyer makes a higher offer on a property you are in the process of buying, and that offer is accepted.
The new accepted offer pushes you out of the purchase, leaving you back at the beginning of your property hunt.
For less experienced buyer, the fear of gazumping is leading them to push the boundaries of their budget.
This is also leading to increased asking prices “across the board”.
“The fear of a higher offer swooping in at the last minute is driving many inexperienced buyers to push into the upper reaches of their budget to secure a purchase, and this trend is contributing to rising prices across the board,” Mr Harriot explained.
“The only sure fire way of determining the cost of buying in this inflated market is to carry out a back-dated survey.
“A valuation from the start of 2020 will show if the increase in price is in line with the previous growth in the area, and just how much more it will cost to buy right now.”
While this is important, the conveyancing and survey expert said buyers should also “plan ahead”.
He added: “With the risk of a downturn and a potentially longer wait before they can sell their new property at a profit, they must ask themselves if the property will suit their needs for the next five to ten years, rather than just the next two.”
The introduction of 95 percent mortgages has provided a vital step up for those looking to get onto the ladder.
However, Mr Harriot has warned that buyers should “tread carefully” and make a judgement based on their own individual situation.
He continued: “Lenders are charging far higher interest rates for these deals and it’ll be very difficult for first time buyers to build a significant amount of equity within a two or five year fixed rate time limit.
“With this in mind, 95 percent mortgages could be a wise move for those intending to stay in the property long term.
“However, those intending to move again in a few years should tread carefully as they simply won’t be able to build enough equity and worse could end up in negative equity in the event of a dip in house prices.”
From June 30, the stamp duty threshold will drop from £500,000 to £250,000.
This will then drop to normal levels of £125,000 from October 1, 2021.