But in a remarkable 11 months the sector has not only survived but performed
better than anyone could have expected. It therefore seems ironic that just as
the success of the covid vaccines are beginning to offer the chance of life
returning to something close to normal, the market could yet become unstuck.
According to the latest Scottish Government data residential property transactions in Scotland fell by 48 per cent between December and January from 13,570 to 7,050, numbers that show how dramatically the brakes are being applied to the Scottish housing market. With the end of the Land and Buildings Tax (LBTT) holiday on the horizon it is clear that many house sellers have taken advantage of the reduced liability but with the end in sight those volumes now face a massive correction.
Like the wider economy, the sector is being propped up by the furlough scheme and concessions such as business rates relief – plus of course the temporary suspension of stamp duty/LBTT in England and Scotland (below £500,000 and £250,000 in the respective countries).
In Scotland the starting point on which LBTT is paid will be reduced to £175,000 from 1 April and will apply only to first-time buyers. However it seems the Chancellor, Rishi Sunak, has still to make up this mind about the tax break south of the Border and should he allow it to continue for a few more months there may yet be a U-turn at Holyrood. This is just one reason why the Westminster Budget, to be announced in Parliament next week, is of such importance to the housing market north as well as south of the Border.
It may seem ironic that the Chancellor is even considering continuing to take a further hit on income from stamp duty when the pandemic has forced the government into literally several hundred billion pounds of unanticipated additional debt. However the stamp duty concession is not just about shoring up the value of Mr and Mrs Bloggs’s three-bedroom semi or enabling companies like my own to continue trading. Property is so fundamental to the strength of the UK economy that its collapse would have a significance far beyond the market itself.
The Chancellor’s strategy has not only allowed the sector to survive but has kept many other parts of the economy going as well while sustaining tax income from sources ancillary to housing. For example, VAT has still to be paid on legal, surveying and estate agency transactions plus a whole host of consumer purchases and services associated with moving home – e.g. new furniture and furnishings, carpets, professional removals, etc. Clearly limiting stamp duty/LBTT has kept a lot more people in work, beyond those directly employed in the property sector.
So hoping the Chancellor will retain the stamp duty holiday for a wee while longer (and that Kate Forbes, the Scottish finance minister will follow suit by reversing her earlier decision) is not just special pleading for my own line of business. With property being such a weather vane for the wider economy, keeping the housing market on an even keel will mitigate the experience of the bumpy road we all face when the furlough scheme starts to run-down.
David Alexander is managing director of DJ Alexander