We’re all getting a bit fed up with the word ‘unprecedented’, but the events of the last 12 months have been a moment in history for everyone across the world. In response, the Chancellor’s pandemic Budget promised to help the nation recover by protecting jobs, livelihoods and pushing investment-led growth. To most commentators, Rishi Sunak made the right decision in choosing to delay tax rises and instead put the focus on reviving businesses.
Here’s what was announced for the property sector.
Extension of stamp duty holiday
The current SDLT threshold for residential properties is £500,000, changing on July 1st to £250,000 and then again to £125,000 on October 1st. For first-time buyers, a discount will be made available from July 1st that means less or no tax will be paid if either (or both) of any of the members of sale are first time buyers, or if the property’s purchase price is less than £500,000. Though this decision has been received warmly, there is still scepticism that the Chancellors dates are premature, and the holiday should be extended further.
Dean Markall, Sales and Marketing Director at Martin Grant Homes, said: “The stamp duty holiday has been a lifeline for the market. By incentivising purchasers below £500,000 to make their move, not only has it boosted the overall health of the property market, but it has allowed many to make incredible savings, particularly during a financially challenging period. The Chancellor’s decision to extend the current stamp duty holiday will prevent thousands of transactions from collapsing and ensure the property market remains steady. Whilst the extension is welcomed, it is still only a temporary incentive.”
Chris Loughead, Development Director for Fernham Homes, believes that returning to the old Stamp Duty structure after the holiday would be detrimental to buyers: “This is just paper over the cracks on an archaic system of taxing that is in desperate need of modernisation. I would like to see the Chancellor consider a fairer version of the Stamp Duty tax going forwards, keeping transactions under £500k exempt indefinitely, and to look at measures that would enable equity-rich, cash poor downsizers to move, freeing up larger homes for growing families.”
Lynda Clark, Founder of National Home Buying Week, echoed this sentiment: “This extension is only temporary and unless there is a clear strategy in place for weaning the housing market off of its current lifeline, we could face a repeat problem in three months’ time.”
New mortgage guarantee scheme
Another major announcement for the sector was the launch of the Help to Buy mortgage guarantee scheme, which provides a government guarantee to lenders for providing loans of up to 95% Loan to Value (LTV). The scheme has had wide take up amongst major banks including Lloyds, NatWest, Santander and HSBC, in a bid “to turn generation rent, into generation buy”. The Chancellor stated, “Even with a stamp duty cut, there is still a significant barrier to people getting on the housing ladder.” The scheme will be available to all borrower types – not just first-time buyers – and across all properties up to the value of £600,000, as opposed to previously administered regional caps and exclusivity on new builds.
Guy Burnett, Executive Director of Development at Metropolitan Thames Valley Housing, expressed concerns for the longevity of the scheme: “The government is ultimately replacing one scheme with another, which will mean the housing market is yet again dependent on a temporary scheme. Long-term, the government needs to offer some clarity on solving the housing crisis as simply rebadging Help to Buy isn’t enough anymore – we need real policies that tackle the problems faced by young people today to ensure they can continue to get onto the property ladder at an affordable price in their preferred area.”
Chairman of Strawberry Star, Santhosh Gowda, said: “A 5% deposit is certainly more achievable, and we welcome the Government’s effort to help buyers realise their home owning dreams. But it will be interesting to see the eligibility criteria and how this differs per lender. Given the risks associated with high LTV deals, you can sensibly deduce they will be much stricter.”
Beyond the mortgage scheme, some were interested to see how far the Chancellor would continue to invest in a ‘Green Revolution’, picking up from last year’s rhetoric. The construction sector was watching closely for more details on how the government would extend the £3bn Green Homes Grant for energy-efficiency improvements to properties, but to little avail.
Guy Burnett of Metropolitan Thames Valley Housing said: “With over 57,000 homes in our [MTVH’s] portfolio, we and other housing associations have a big part to play in cutting carbon emissions from our homes. Funding for retrofitting existing homes to make them more environmentally friendly is desperately needed, building on the existing pilot programmes that are already under way.”
A Spring boom?
Interestingly, straight after the Budget not only did share prices in the UK’s largest housebuilders go up, but website traffic to Rightmove and other property search engines reported rises of up to 15%. Our clients have similarly reported an uptick in enquiries from buyers. What happens in the property market over the next few months will help determine how quickly the whole of the UK economy recovers. The lockdown legacy has certainly changed our buying habits, renewing our love for our gardens in particular. But will this spring boom lead to an inevitable bust, in the precarious balance between demand and supply? We remain cautiously optimistic.
Edward Heaton, founder of buying agents, Heaton & Partners, concludes: “There is a genuine feeling of hope in the air that makes the bank of England’s ‘coiled spring’ economic outlook feel almost tangible. The Chancellors Budget today certainly underscored this positive stance. I think the OBR’s forecast for the UK economy to return to its pre-pandemic level by the middle of next year – six months earlier than previously thought – will give the housing industry greater confidence in the coming months.”