It’s been a big week for the UK property industry. Just as we were all preparing for the Chancellor to deliver his first Budget, news came through that the Bank of England is cutting interest rates by 0.5% in response to the ongoing threat of Coronavirus.
It’s welcome news across the industry and our clients overwhelmingly applaud the move. It will clearly help home-buyers access more affordable mortgages, something first-time buyers can benefit from in particular.
The Chancellor’s first Budget, however, fell short of expectations. Our clients, which include leading estate agents, national housebuilders and PropTech experts had hoped for some meaningful interventions that would support market growth. Years of uncertainty as a result of Brexit negotiations has taken its toll on the industry and whilst it remains resilient, it was hoped this Budget could inject some energy that would keep the recent ‘Boris bounce’ bouncing on.
Stamp Duty reform was high on the wish list. Edward Heaton, of national buying agents Heaton & Partners, was disappointed with the lack of reform and the additional 3% stamp duty on second home and buy-to-let purchases was a particular concern.
“I would have liked to have seen further measures to address the continued squeeze on buy-to-let landlords, to deter them from leaving the private rented sector altogether. Private landlords are vital in keeping housing supply in balance for millions of renters, keeping rents down and incentivising longer-term tenancy agreements.”
Kent-based Fernham Homes is also concerned about the extra stamp duty levy. It’s managing director Michael Canham believes in the long run, it will be first-time buyers that will bear the brunt of the tax.
“It’s disappointing the Chancellor didn’t go further in today’s Budget to help young people secure their first home and revisit the additional 3% stamp duty facing purchasers of second homes and buy-to-let properties. This punitive tax is likely to reduce the number of properties available for private rent, driving up the cost of renting and as a consequence make it even harder for first time buyers to save the deposits needed to secure their own home. It’s counter-productive and needs to go.”
Thumbs-up for green measures
The Government’s new investment in environmental policies went down well with Daniel Burton, CEO of the smart energy specialist Wondrwall.
“The Chancellor had a clear focus on green policies, with rhetoric to “protect our planet” through the Treasury’s Net Zero review. By freezing the Climate Change Levy on electricity and raising it on gas by April 2022, we are delighted that they are showing commitment to decarbonising our power and taking serious measures to achieve the carbon net-zero 2050 target.”
But the company wants more. Burton added: “This is a step in the right direction but adding green smart technology in addition to eliminating gas systems is vital. Whilst most people support energy efficiency in the home, these homes costs more and not everyone is willing to pay these costs up front. We hope that the Government will now extend this commitment to the green agenda by offering grants and other financial incentives to home-buyers.”
What about overseas buyers?
The announcement of a 2% stamp duty surcharge for international buyers was met with mixed opinion. Whilst some in the industry felt this was a nod to domestic buyers, many in Prime Central London raised concerns about further tax hikes that could discourage overseas investment.
With the reform coming into action from April next year, Heaton commented, “This delay should help give London’s prime property market some helpful breathing space to recover after several years of uncertainty. The fact that this levy is 2% instead of the predicted 3% will also help ease the pain to prospective overseas investors. We may well see a rise in overseas buyers in the short term to get deals over the line before next April. This will be an increasing trend to keep an eye on in the capital, but is a risky move overall to deter overseas wealth at a vulnerable economic time for the UK.”
Getting it done
The Chancellor also announced some really important infrastructure investment today, designed to help rebalance the UK economy to benefit the whole country. It will be interesting to see how this plays out and whether there are any longer-term impacts on the UK’s housing market and property industry more widely.
There’s no doubt this is an ambitious Budget and we look forward to seeing how these commitments from the Government unfold in the coming months and years. I don’t know about you but it seems to us that the Government is very keen to get something done.