Budget 2021 – what was announced about property?
In one of the most eagerly anticipated Budgets for many a year, Chancellor Rishi Sunak announced a number of measures to continue supporting the economy through the coronavirus crisis, including an extension to both the furlough scheme and business rates relief for the retail, hospitality and leisure sectors until September.
As expected, property featured front and centre, too, with Sunak announcing a mortgage guarantee scheme to encourage more lenders to offer 95% mortgages.
The biggest property announcement, though, came with regards to the stamp duty holiday and a three-month extension of it from March 31 to June 30, before the nil rate (the rate at which buyers start paying stamp duty) falling to £250,000 until the end of September – still double its normal amount.
Elsewhere, there was no mention of the much-anticipated increase to Capital Gains Tax (CGT). But later this month, on March 23, a ‘tax day’ could see the government set out how property taxes will be reformed to reduce the coronavirus spending deficit.
Here, we at Kings Group take a closer look at what Sunak announced today and the impact it will have on the property sector.
Stamp duty holiday extended
The Chancellor had faced considerable pressure – from members of the public, MPs, trade bodies, conveyancers, estate agents and others – to extend the stamp duty holiday beyond March 31, to avoid a possible cliff-edge scenario.
Not only was there a petition which received more than 150,000 signatures, but there was also a parliamentary debate in which a whole host of cross-party politicians called for an extension to the holiday on behalf of their worried constituents.
The pressure exerted in recent months from all sides appears to have done the trick, as Sunak outlined that the stamp duty holiday will be extended from March 31 to June 30 – ‘and then, to smooth the transition back to normal, the nil rate threshold will be £250,000 until the end of September’.
In short, this means there will be a stamp duty holiday on properties up to £500,000 until the end of June (as is the case currently), and then tapering off on properties up to £250,000 until the end of September. (No details have yet been provided on whether these dates will be a dreaded ‘cliff-edge’ or a tapered end to each. )
From October 1 it appears that the pre-Covid stamp duty thresholds and levels will resume. In normal times, the nil rate threshold is £125,000.
While most first-time buyers are already covered by the stamp duty exemption that means buyers of homes up to £300,000 pay no tax on their purchase, the extra extension at a lower threshold could still help second-steppers of lower-priced properties and landlords investing in more affordable properties.
Until the end of June, nothing changes with regards to the stamp duty holiday, which should help many of those transactions already in the pipeline. But there will be concerns that a fresh cliff-edge
will be reached at the end of June, with many buyers of homes worth more than £250,000 potentially still missing out.
The extension and then the transition/tapering off until September should help to provide buyers and sellers with more certainty and security, allowing them to plan accordingly. This should keep a demand, which has been at record levels, high. It will also give lenders, conveyancers, surveyors, and agents some more breathing space, although concern will remain about new cliff-edges.
95% mortgages for buyers
Alongside the extension to the stamp duty holiday, the Treasury is aiming to help future property buyers with a mortgage guarantee scheme expected to be available to all buyers of properties costing up to £600,000.
The scheme, plans for which were originally announced by Boris Johnson last October, will see the government provide lenders with incentives to bring back 95% mortgages. A number of major lenders are already on board, with more expected to follow.
Low-deposit lending virtually disappeared during the pandemic and the number of products for borrowers has only recovered to a fraction of what it was before March 2020.
Property buyers will be able to purchase a home under the new scheme with a deposit of just 5%, significantly lower than the 10% or 15% currently required by many lenders.
It’s been speculated that the scheme will launch in April, but firm details on the plan haven’t yet been provided. An excellent analysis of the scheme can be seen here.
What else was announced?
There was no mention of Capital Gains Tax, a one-off wealth tax or the 2% stamp duty surcharge for overseas buyers which is being implemented from April 1, but it is likely extra information on CGT and the stamp duty surcharge will be announced at a later date.
In truth, this Budget was all about the stamp duty extension and the 95% mortgage guarantee scheme, both of which had been leaked beforehand.
More widely, on the economy, Sunak said it should return to pre-Covid levels by mid-2022, but even by 2026, the economy will be 3% smaller than it would have been had the virus not occurred.
The government says it has already provided £280 billion of support since the start of the pandemic – however, even despite this, 700,000 jobs have been lost and the economy has shrunk by 10%.
If you would like to find out more about what was announced, and what it could mean for buyers, sellers, landlords, and tenants, please get in touch with Kings Group today.
It’s more important than ever that you work with an experienced estate or letting agent. We can help you to remain compliant and get the most from your property journey.
For more information on how we can assist you, please contact one of our branches in Essex, London or Hertfordshire today. We also offer a free and instant online valuation to give you an idea of how much your home could be worth on the current market or how much you could be charging in rent.
