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Calls for stamp duty holiday with UK property market 'in freefall'

Tom Belger
Finance and policy reporter
Property in London as the market freezes up due to the coronavirus lockdown. (Matt Clayton/View Pictures/Universal Images Group via Getty Images)

The UK government should announce a stamp duty holiday to revive the UK housing market after the COVID-19 crisis, according to leading industry voices.

The Royal Institute of Chartered Surveyors (RICS) called for a temporary suspension of the tax on property sales to boost activity whenever Britain starts to emerge from the coronavirus crisis.

Boris Johnson floated slashing stamp duty before he came prime minister last year. RICS has previously backed a root-and-branch review of the tax, and said it would not back a holiday “on a whim.”

But it warned the finances of potential buyers and confidence in the market would be limited even when activity eventually begins to recover as lockdown restrictions lift.

“A stamp duty holiday could be one of the ways to reactivate the housing market quickly as a short-term measure,” said Hew Edgar, its head of government relations, in a press release on Thursday 9 April.

Read more: Estate agents say COVID-19 impact will be limited and short-lived

RICS’ latest monthly survey of members lays bare the unprecedented upheaval facing the industry, as well as anyone who would normally be looking to buy, rent, sell or let a home.

The majority of members expected both sales and prices to drop not only in the short-term but over the next year.

“Meltdown,” “chaos,” “freefall,” “downward spiral,” and “unchartered waters” are just a few of the words used by surveyors and estate agents asked to express their views over the past month.

Several said activity had collapsed entirely, from buyer interest to valuations to sales, with even agreed sales put on ice. One planned to furlough 80% of staff, with Purplebricks making a similar announcement last month.

Read more: Rising UK house price data ‘irrelevant’ with market in lockdown

Another said government minister Michael Gove had “singularly extinguished the market” by warning against house moves, though health fears over viewings had started to hit the market even before the government lockdown.

“Market? What market?” wrote Stephen Dodgson of Rainford Surveyors in Heswall in north-west England.

“No one can move realistically move in or out which is creating a legal and regulatory nightmare,” wrote Neil Foster of Foster Maddison Property Consultants in Northumberland.

While most expected activity to remain extremely limited during the lockdown, only some predicted prices would fall and many expected a swift and substantial ‘V-shaped’ recovery in activity and prices. RICS members still believe price growth will average out at 2.5% a year over the next five years.

But with economists warning of the worst recession in modern history, some expect mounting unemployment, lower incomes and job insecurity to significantly weaken demand and prices.

Read more: Coronavirus sparks biggest drop in hiring since 2009

Tighter lending restrictions and an inability to carry out physical valuations could also limit mortgage lending. But banks appear keen to continue lending for now at least, with credit cheap and some restrictions only temporary to deal with surging queries from business customers.

Knight Frank has said growing numbers of lenders were also shifting to virtual valuations. Some estate agents told RICS they too had “adapted extremely quickly” through virtual market appraisals and viewings.

Meanwhile many residential construction sites have shut down, and a separate purchasing managers’ index (PMI) survey earlier this week showed the steepest downturn in the building sector since the financial crisis.

Housebuilders expect further stoppages, with continued work increasingly controversial and staff absences growing, which along with falling demand could halt the delivery of many new homes.

“The question is whether interruption in new builds will drive prices up or damage to income will force demand and prices down,” said Nigel Morgan of Spalding & Co estate agents in Norfolk.

Surveyor Richard Birchall also said tax hikes could be on the political agenda once the crisis subsides, with the national debt ballooning as the government has stepped in to subsidise firms. “Property is a soft target. Must assume prices will decrease as a result.”

The Treasury has been approached for comment.

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