In his Budget today (March 3rd), Chancellor Rishi Sunak announced a tapered extension to the stamp duty holiday until 30 September.
“A three-month extension – and additional help until September – will be more effective than an additional six weeks, which was previously rumoured to be in the Chancellor’s plans. However, it still creates a cliff-edge so even though more buyers will benefit from stamp duty savings than previously thought, there will still be some who miss out”, comments Bryan Mansell, Co-Founder at Gazeal.
This will help more people to purchase their homes before the deadline in addition to assisting with the mitigation of the impacts of the latest coronavirus lockdown.
This was a relief to many buyers who were left trying to complete their transactions before the deadline of March 31, or face a £15,000 tax bill.
The Chancellor also announced a new Government backed 95% mortgage scheme, this will enable house buyers to slash the minimum amount needed by to purchase a home by taking out a mortgage worth 95% loan to value (LTV), this would mean that only a 5% deposit would be needed to secure a place on the housing ladder.
The Government will reduce the risk of the loan by applying a guarantee to part of borrowers home loans.
If, one month, the borrower is unable to pay, the Government would pay the outstanding amount – borrowers would likely face some repercussions though if this were to happen.
“A stamp duty-related boost, combined with the vaccine rollout as we move into spring and towards summer, means the market should be in good health over the coming months with agents able to complete existing transactions and build their future pipelines.
Once the stamp duty holiday comes to an end, it will be time for the market to move on. As we come out the other side of the pandemic, it would be pleasing to see the government return to its pledge of improving the home buying and selling process through increased efficiency and transparency.
As accentuated by the stamp duty holiday rush, the current homemoving process is broken and struggles to cope with a high number of transactions.
Improving security for consumers, reducing the chance of fall-throughs and making the moving process more efficient would not only help buyers, sellers and agents, but more transactions going through would provide the Treasury with an increase in much-needed stamp duty revenue.
Meanwhile, news that the government is launching a guarantee scheme to bring back 95% mortgages provides prospective buyers with a further boost.
Understandably, low-deposit lending has been affected badly by the pandemic. With the government taking on some of the risk, more lenders should feel confident in providing finance to purchasers of property worth up to £600,000.
A new scheme designed to help people onto the housing ladder could see demand for homes increase. However, whether the required number of homes to meet rising demand will be available is doubtful as there remains a serious housing shortage in the UK.
With this in mind, it’s disappointing that we are yet to hear more about how £20 billion pledged to support new housing last year, which includes a £7.1 billion National Home Building Fund, is being used to address this shortage”, Mansell continued.
Neil Cobbold, Chief Sales Officer at PayProp, comments:
“Today’s Budget once again focused on the government’s financial support in response to the COVID-19 pandemic. The most significant headline announcement for the private rented sector in the short term – an extension of the furlough scheme until the end of September – will provide additional support for many tenants.”
“The furlough extension will indirectly safeguard the finances of landlords and letting agencies by helping to keep rent arrears under control in the short term.”
“However, when the furlough scheme does come to an end, there could be a significant number of redundancies which could put additional pressure on many tenants’ ability to pay rent.”
“There were rumours that rent grants for tenants in England – similar to those introduced in Scotland and Wales – were being considered by the Chancellor, but this additional support hasn’t materialised and the sector could now face a cliff-edge in a few months.”
“The three-month extension of the stamp duty holiday – and lower threshold until September – provides a timely boost for landlords and other investors currently in the process of purchasing properties as they now have a much-improved chance of benefiting from thousands of pounds in tax savings.”
“Allowing more investors to expand their portfolios within the stamp duty holiday window could improve market sentiment and help landlords to provide much-needed rental housing stock for tenants.”
“Despite strong rumours of it happening, an increase in Capital Gains Tax (CGT) rates did not come to pass. But while landlords will breathe a sigh of relief today, they should remain prepared for CGT changes in the coming years.”
“Moreover, landlords who hold their property portfolios in a limited company structure will need to consider the impact rising Corporation Tax rates will have on their finances.”
Ross Counsell, chartered surveyor and director at GoodMove commented:
“It was the news many of us were expecting, but today Rishi Sunak has confirmed the extension of the Stamp Duty Holiday until June 30th, meaning buyers won’t need to pay a hefty Stamp Duty tax on the purchase of their next property.”
“Stamp Duty has been paused since July 2020, and it can certainly be said that it has had a positive impact on the housing market this past year.”
“Along with demand for properties shifting from proximity to cities to spacious properties in more rural locations, the promise of not paying the often-hefty Stamp Duty has left people rushing to buy a new property to take advantage of it while they can.”
“In fact, according to recent data from the Centre for Policy Studies, the Stamp Duty holiday has increased the number of property sales by 140%; from 132,090 in pre-Stamp Duty Holiday (between April and June) to 316,300 in the final quarter of 2020. This marks the highest increase in sales since 2007.”
Has the Stamp Duty Holiday contributed to higher property prices this past year?
“With such high demand for property naturally comes higher average property prices.”
“According to ONS’s latest statistics, UK average house prices have increased by 8.5% over the year to December 2020, and now stand at a record high of £252,000.”
“This is the highest annual growth rate for house prices in the UK since October 2014 – that’s a six-year high. Mortgage approvals are at an all-time 13-year high too, which has in turn made lenders even more selective to who they lend to.”
“So, although lockdown and the Stamp Duty Holiday has helped keep the housing market going throughout an otherwise difficult year, it has meant that property prices in the UK have become unattainable for many.”
What does the Stamp Duty Holiday extension mean for the housing market in 2021?
“The Stamp Duty deadline was originally planned for March 31st, and we predicted that the number of house purchases will remain very high until March, and then drop off between April-June before returning to normal.”
“We also expected less people looking to buy a property and applying for a mortgage once the deadline was done, making better mortgage deals and lower house prices more attainable.”
“Now the Stamp Duty Holiday has extended to June 30th, we no longer expect the housing market to drop off between April-June, and instead predict a steady rate of high house prices and mortgage applications until the end of June.”
Should buyers wait to purchase property until the end of the new deadline?
“For anyone looking to buy a property, we strongly advise you to hold off buying a property until the end of the new Stamp Duty Holiday deadline, if you can.”
“If we have learnt anything from this past year it’s that Stamp Duty Holiday has bolstered house prices and made it difficult for buyers – but great for sellers.”
“It’s important to remember however, that the deadline has only been pushed back by three months.”
“Therefore, for anyone wanting to take advantage of the Stamp Duty holiday before it ends, they have less than four months to find a home, put in an offer, wait for it to be accepted and complete the purchase, which is cutting it fine even in ‘normal’ circumstances.”
“It’s always best to spend time finding the right home for you and your family, and you should never rush a decision this big.”
“If you do, it could mean a whole host of costly problems later on that you simply didn’t have time to spot during the viewing and buying process.”
“There’s also the advantage of the UK resuming normality (hopefully) by June 21st, and we expect people to therefore be less preoccupied with moving homes as they won’t be spending all their time there as they have been this past year.”
“With the world opening up again, people may also not want to invest in a property and spend their money on it, but instead on all the things we haven’t been able to do, including holidays, staycations and planning activities, trips and days/nights out with friends and family.”
“The predicted date for the UK fully opening up again also falls at the same time as the new Stamp Duty deadline. We predict house prices and mortgage applications to fall post-deadline as people won’t be rushing to meet the Stamp Duty deadline, so July onwards could indicate a great time to buy a property in the UK, due to the end of both lockdown restrictions and Stamp Duty holiday.”
Isobel Thomson, safeagent Chief Executive, said:
“It has been an incredibly tough 12 months for many in the private rented sector, and while it is positive to see additional support such as the extension of furlough and the Universal Credit uplift, this Budget leaves a gaping hole in financial support for the PRS.”
“We first raised the proposal of grants for landlords in August 2020 – in line with grants for other self-employed people.”
“It is a real concern that this Budget failed to offer any support for private landlords who are crucial to providing homes in the PRS.”
“Over the last year they have been asked to shoulder an unsustainable burden of risk without Government help and today’s announcement offered no change to this.”
“The Government’s commitment to turn Generation Rent into Generation Buy is laudable in the longer term but what happens in the meantime?”
Andy Foote, director at SevenCapital comments:
“This is a positive budget for the property market announced today.”
“The extension of the stamp duty holiday as it is until June, and the lesser anticipated extension of a holiday on properties up to the value of £250,000 will go a long way in avoiding a collapse in transactions – as previously feared.”
“Given the average UK house price sits at around £252,000 overall, and with properties in the Midlands and North of England, Wales, Scotland and Northern Ireland individually sitting at a lower average, this effectively means the average buyer can continue with new purchases through to September.”
“Will this mean simply delaying a stall in market activity? We will see, however in the short term, considering the significantly higher level of transactions the industry is currently fighting to complete, this is good news. It is likely we may see a further boost to transactions over the next six months.”
“Landlords and owners of second homes will also be breathing a sigh of relief at the news that capital gains tax will not be increased, contrary to rumours flying around prior to the Budget being revealed.”
“This group of people have already weathered multiple tax-storms over recent years and in a period that has proven tough for many, a hike to taxes would have potentially pushed them over the edge and forced a further exodus from the market, which would in turn have a knock on effect on the rental market. Thankfully for now, this will be avoided.”
Read the Budget in full here.