Should you buy before the stamp duty increase?

publication date: Nov 23, 2009
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books
On 1st January 2010 the stamp duty threshold changes as follows:-

0% on purchases up to £175,000
1% on purchase between £175,001 to £250,000
3% on purchases between £250,001 to £500,000
4% on purchases between £500,001+

0% on purchase up to £125,000
1% on purchases between £125,001 to £250,000
3% on purchases between £250,001 to £500,000
4% on purchases between £500,001+ 
As a result, if you complete on a home for £175,000 before 31st December 2009 you won't pay any stamp duty and from January 2nd (no-one will be working on New Year's Day!) you will pay 1% x £175,000 = £1,750 to the government in stamp duty land tax.

So is it worth you completing before the end of the year? Firstly if you are already in the process of buying, then absolutely yes, you should complete before the end of the year. However to do this you need to make sure your legal companies put in writing that they will complete prior to 31st December - otherwise they may miss the deadline at your cost!

Secondly, if you are looking at making an offer on a property now to complete before the end of the year, that's quite a big task as most purchases/sales take longer than six weeks and really you are looking at completing within five weeks due to Xmas holidays etc. So if you are well into the buying process, narrowing down the property you want, then it's worth getting on with the purchase, but you MUST choose a good legal company that will do a 'no sale no fee' purchase (and sale for the sellers) that sign up to completing by 31st December 2009. Any legal company that says 'it's difficult to commit to a deadline' don't use them as they obviously don't know how to complete under pressure.

Finally, the only reason you should be buying a home now is that you either want to:-

1. Invest and make some money in the future.
2. You are buying for the first time and looking to stay in the home for five or more years. 
3. You are already a homeowner and are trading up so you save money on the property you are buying.

And for the sake of saving a few thousand pounds, you have to consider whether it's worth putting yourself under pressure up to until Xmas to buy. It's likely that next year from February through to May that more properties will come onto the market for you to choose from and prices are unlikely to start increasing much, unless you are in a very high demand area. So, for the sake of saving less than £2,000, it's not really worth 'rushing' into a property purchase of a home you need to be able to stay in for five or more years to let prices fully recover from the current recession.  

So, if you are in the process of buying, or are about to make an offer, then do try to beat the stamp duty increase. However if you are only just thinking of buying, it is much better to take your time as the lenders and legal companies will struggle to complete on a property in the few weeks we have left before Xmas.
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