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Dec. 7, 2020, 2:07 p.m. EST

Buyers Looking to Take Advantage of the U.K. Stamp Duty Holiday Need to Get Started—Yesterday

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For prospective real estate investors interested in taking advantage of the U.K. stamp duty holiday, experts have one piece of advice above all else: “Get on with it.”

To revitalize the property market after the country’s first coronavirus lockdown, the Chancellor of the Exchequer announced a temporary freeze on stamp duties, or transfer taxes, in England and Northern Ireland on purchases of up to £500,000 (US$668,704). That’s up from the typical threshold of £125,000. For purchases over that amount, buyers pay no stamp duty on the first £500,000 and then pay a tiered tax after that. It means you can save up to £15,000.

The holiday, which was announced in July, expires on March 31, 2021. But a surge in activity in recent months means it is taking longer than usual to complete deals. In the City of London, for example, the year-over-year increase in time between listing and completed sale is  as high as 110 days .

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As the deadline looms, buyers whose purchases take too long to complete could miss out on the tax savings. (There is some talk of a potential extension to the tax holiday—just as authorities extended the U.K.’s furlough scheme—but that is not a guarantee. The government, more recently, appears to be focused on filling fiscal holes where it can.) So how quickly should you get moving?

“I think the short answer is you probably already want to be underway in terms of a transaction,” said Knight Frank’s head of U.K. residential research, Tom Bill .

If you’re not, you’ll need to be very soon.

He stressed that to benefit from the tax holiday, you must have completed a transaction—not just exchanged contracts. At the moment, that can take several months.

“Absolutely this side of Christmas, that process would need to be under way if you were to have any sort of guarantee or comfort of it being complete before the end of March,” Mr. Bill said.

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What’s the Holdup?

There are several reasons why transactions are taking so long. For one thing, prospective buyers were not allowed to view properties throughout the U.K.’s first, three-month lockdown in the spring, so there was pent-up demand when those restrictions were lifted. (Though the country went back into a second lockdown in November, this time viewings were allowed to carry on.)

Mr. Bill said the stamp duty holiday accelerated what was bound to be higher-than-usual activity levels this summer.

“The market sprang back to life quite quickly after it reopened in May,” he said. “The system is struggling to cope with the weight of that demand, and on top of that is the stamp duty holiday.”

The lockdown appears to have inspired many to make country home purchases. But, Mr. Bill said, the backlog in demand actually goes back much further than last March. He said prices have been subdued for five or six years due to Brexit uncertainty, tax regime changes, and frequent national elections.

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“It wasn’t just the lockdown, it was pent-up demand that had been building for a period of years,” he said.

Kate Eales , Strutt & Parker’s head of regional agency, said many people put off home purchases last year with plans to invest in 2020. Then the pandemic hit.

“I liken it to a hose pipe with a kink in it, and the minute the kink was undone all the water gushed out,” she said.

Prices in Check

Despite the demand, prices have not risen dramatically.

“There have been more properties coming to the market as people want to take advantage of this [tax holiday],” said Andrew Perratt , Savills’ head of country sales.

He cited “quite high” levels of supply currently matching demand.

That’s because those same political factors that held buyers back recently have also kept sellers from putting properties on the market.

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Now, Mr. Bill said, things feel well-balanced.

“We’re not seeing ambitious asking prices, everybody seems to be realistic on pricing, and that’s probably helped the high levels of activity,” he said.

But as a result, everything from mortgage approvals to the conveyancing, legal and surveyance processes have been slowed down. By Ms. Eales ’ estimate, what is normally a two-to-three month process is now taking more like four months..

“You really need to have bought by February to give yourself time,” Mr. Perratt said, though it all depends on the complexity of the transaction.

A new property with a new title should in theory take less time, he said, while a Victorian house will be more complicated.

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So What Can Be Done?

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