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Delays in local authority property searches are threatening property buyers’ eligibility for stamp duty tax breaks.
Only last week the Treasury published a press release claiming that house sales rose by 21.3 per cent in September on the back of a stamp duty holiday introduced by Chancellor Rishi Sunak to bolster the housing market during the Coronavirus crisis. The holiday applies to residential properties worth up to £500,000 (with commensurate savings for more expensive properties) and will run until 31 March 2021.
The temporary reduction means that nine out of ten people getting on or moving up the property ladder will pay no stamp duty at all, said the Government. ‘This measure delivers an average saving of £4,500 in Stamp Duty Land Tax’, it said.
The problem is that stamp duty and hence the temporary stamp duty savings only apply at the date of completion. And it now seems that as many as 365,000 property transactions already underway or on the verge of being agreed will not be completed by 31 March 2021.
An unknown factor is whether or not increasing numbers of buyers, realising they will miss out on stamp duty savings, will decide to drop out of deals.
In normal times property transactions can take between three and five months to complete. But these are not normal times.
Research undertaken by law firm Simpson Miller has revealed that it can now take up to 42 days just to obtain property searches, a key element of the conveyancing process.
A sharp upsurge in transactions has coincided with under-pressure conveyancers and local authorities operating with depleted staff levels due to the Coronavirus pandemic. Building societies have also indicated problems in dealing with the current level of mortgage applications.
The Conveyancing Association has said sales agreed after September are unlikely to be completed by the end of March – meaning more than 300,000 transactions will miss out on stamp duty savings, according to property market analyst Twentyci.
‘Whilst more properties are coming to market and being viewed and sold there has not been an overnight increase in the capacity of surveyors, conveyancers, search providers or mortgage underwriters. We have not seen the capacity pinch with removers as yet but that must be following close behind’, said TwentyCi’s chief customer officer Colin Bradshaw writing in the ‘Pandemic edition’ of his firm’s latest quarterly report.