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To Buy or Not To Buy? The property market in the age of COVID-19

The events of the past few months have been confusing for homeowners. With the lockdown, predictions of a global recession and now a large government stimulus coming in short succession, many have been left unsure of where they stand. In this article, I’ll explain how COVID-19 has affected the property market, how the government intends to get it moving again and what the longer-term outlook is.

How has the pandemic affected the property market?


The ongoing COVID-19 pandemic meant that the property market was effectively closed for a couple of months. As a result, annual house price growth was negative for the first time in eight years during June, where house prices dropped by 1.4%, which came after a 1.7% decrease in May.

During the lockdown, re-mortgages were almost the only option available, at one point representing 75% of the total mortgage searches. To make things even more difficult, last month, lenders temporarily withdrew products at 90% Loan to Value (LTV) after seeing excessive demand. Some lenders have resumed lending at 90% LTV, albeit with a limited offering. However, the issue remains of how to get the mortgage market back up to full speed as quickly as possible.

Kickstarting the mortgage market

To get things moving, as part of the Summer Statement earlier this week, Rishi Sunak announced a new incentive for anyone looking to purchase a property. Under the new measures, no one will have to pay Stamp Duty Land Tax (SDLT) on the first £500,000 of the property purchase price, though Stamp Duty will still apply to the excess of this amount. This is a temporary measure which will run up to 31st March 2021.

What is Stamp Duty?

Stamp Duty is a tax you might have to pay if you buy a residential property or a piece of land in England and Northern Ireland. Usually, the threshold where you start paying stamp duty is £125,000, or £300,000 for first-time buyers.

As an example, if you were to purchase a property for £400,000 and you’re not a first-time buyer, under normal circumstances you would pay £10,000 in Stamp Duty:

· 0% on the first £125,000

· 2% on the portion between £125,001 and £250,000 (£2,500 SDLT)

· 5% on the portion between £250,000 and £400,000 (£7,500 SDLT)

Following the recent changes, in this example, you will now not pay any Stamp Duty on the property purchase at all. In fact, it has been estimated that the change in legislation means that over 90% of buyers will not pay stamp duty when purchasing a property.

So what are new Stamp Duty rates up to 31st March 2021?

The changes mean that house buyers will make a Stamp Duty saving of £15,000 on the first £500,000 of the purchase price. For any of the purchase price over £500,000, the Stamp Duty bands remain unchanged. For example, if you were to purchase a property for £750,000, you will pay Stamp Duty of £12,500 (5% of the excess £250,000).

What about Stamp Duty on Additional Properties?

If you’re buying an additional property, such as a second home or certain buy-to-let properties, there is still the requirement to pay the extra 3% in Stamp Duty on top of the new rates for each band. This rate applies to properties bought for £40,000 or more.

When do I pay Stamp Duty?

The requirement to pay stamp duty is triggered when you complete the purchase of the property. So if you've exchanged before 8th July but haven't completed, you'll benefit from the increased thresholds.

The Chancellor has said the average saving will be £4,500. However, those buying properties in Scotland and Wales aren't included.

The medium-term outlook for the housing market remains highly uncertain

The change to Stamp Duty should help to ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude.

The rebound in the housing market will depend on the performance of the wider economy, which will, in turn, be determined by how the pandemic and restrictions activity evolve.

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