If so what will the impacts be?
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I do think the governments move to increase stamp duty allowance is a strategic move to revive the property market. The stamp duty abolition will save the average buyer around five thousand pounds which will encourage people to purchase property. Property will be viewed as more affordable which will likely lead to an increase in sales.
I think this will have an impact on the property market, but also the wider economy.
Firstly, it will help to regulate property prices, which have been falling since the pandemic. This comes back to the basic theory of supply and demand. An increase in demand will ensure that prices do not fall too low.
Secondly, an active property market will have an impact on the wider economy. It is estimated that house buyers spend around 5% of the purchase price on doing the house up, or new furniture etc. This will increase retail spending and spending in the building/gardening industry, thus stimulating the wider economy.
Thirdly, public confidence will be positively impacted. The more confident that people feel about the state of the economy, the more likely they are to spend money rather than saving cautiously. Again, this leads to stimulation of the wider economy.
I definitely agree @Camilla Uppal, these are amazing points, once again. This will cause an energy boost to the property market, which once was seen as the pinnacle of safe investment.
Property is a market which is utilised by many businesses and investors such as insurance companies and particularly pension schemes to generate money. This area has for many years been seen as a safe investment which will bring in monthly and consistent revenue (rent). However, with this pandemic this has drastically changed. Businesses have refused to pay rent due to forced closures and lack of income, rattling the property markets position as a safe investment haven.
In order to prevent the property market, which is huge in the UK, becoming unstable I believe the Government introduced this scheme.
Brilliant points Mine, I had not thought of the insurance and pension scheme reliance on the property market!
On the other hand, we could argue that this move by the government will not be enough to revive the property market.
Millions of people are having their wages propped up at the moment with the furlough scheme, and many people fear a double dip recession which could happen if we we have a second spike of coronavirus cases.
Lets see whether people's confidence actually improves... I think only time will tell.
I agree. One potential concern that I have is that the scheme could benefit those who are already "well off" and in stable jobs who are feeling more confident about spending - which is great. But the scheme may not benefit those who are employed in sectors which are less stable such as hospitality and retail. Although well intentioned, this scheme could inadvertently increase the divide between 'rich' and 'poor' and turn out to be a scheme that only benefits the 'rich'.
Exactly, more schemes need to be introduced to support people in particular risky industries such as retail, hospitality and aviation. It is not enough to increase the stamp duty allowance if it only benefits those with substantial savings and are on good and stable incomes. The scheme as you said @Camilla Uppal needs to be considered as a wider inclusive one. Considerations need to be made to prevent the income and standard of living gap to further increasing (as the gap is very big as it is).
Millions of people are already renting and this figure is likely to increase due to many factors such as lack of employability opportunities, the economic wave and now due to the pandemic.
The pandemic will increase the rental demand as banks are making it harder for people to obtain loans, the deposits increasing to 15% as oppose to 10% and the uncertainty caused by the pandemic.
The scheme introduced by the government is essentially a stamp duty holiday to encourage people to spend money and revive the property market. This will undoubtedly stimulate the supply of rental homes while also driving wider activity in the housing market.
This scheme will provide a relief to first time buyers and push people to purchase houses as oppose to renting out.
However, this is a temporary measure and the affects of the pandemic on the economy in the medium to long term is still unknown. It is arguably inevitable to prevent a recession in the near future, particularly once furlough schemes end in October, so long term measures need to be in place.
How this will affect the economy and property market needs to be observed as many are scared and skeptical to use their savings to buy property when their futures are on a hold.