In a bid to change ‘Generation Rent into Generation Buy’, Chancellor Rishi Sunak announced that a new policy to stand behind homebuyers through a mortgage guarantee.
Lenders who provide mortgages to home buyers who can only afford a 5% deposit, will benefit from a government guarantee on those mortgages.
The Chancellor also announced that the up-to-£500,000 0% stamp duty rate will finish at the end of June, rather than the end of March.
Business Leader got the views of industry leader on the Spring Budget.
5% mortgage deposit scheme
Marc von Grundherr, Director of lettings and estate agent Benham and Reeves, commented: “While Help to Buy in its various forms has helped homebuyers to an extent, it’s also done a good job of pushing house prices higher and homeownership even further out of reach for many.
“To roll this sort of counterproductive initiative out to the whole of the market wouldn’t be so bad if the government also addressed the issue of supply. If you have trouble climbing the stairs you need to add a handrail, not increase the size of the staircase. However, the government has, yet again, chosen to do just this.”
CEO of Enness Global Mortgages, Islay Robinson commented: “95% mortgage products in any shape or form take the market into pretty overheated, dangerous territory and we’ve previously seen the results of this kind of precarious lending to those who aren’t really in the financial position to commit to it.
“As always, the devil will be in the detail but many lenders have already tightened their belts over the last few months in terms of their high loan to value offerings.
“Although many big lenders have committed to the government’s announcement today, it will be interesting to see just how many buyers are able to secure such a product when it comes to actually applying. Converting Generation Rent to Generation Buy is a noble initiative but not if it comes at the expense of wider market health.”
Stamp Duty Holiday Extension
CEO of Keller Williams UK, Ben Taylor, commented: “Today’s stamp duty holiday extension will be very warmly welcomed by homebuyers waiting to complete and currently stuck in the transaction pipeline due to market delays.
“The original stamp duty holiday is on track to save homebuyers an estimated £1.5bn and with the extension in place, this benefit should increase to £2bn with 360,000 transactions likely to benefit until the new June deadline.
“However, the rabbit out of the hat of this Budget is the welcome news that the minimum threshold will increase to £250,000 until the end of September, bringing a further saving and a softer landing as the market returns to normality. This equates to a further saving of £2,500 for those completing once the main deadline has expired.
“But with the holiday bringing such huge benefit to the market, surely it’s time for the government to re-evaluate the tax charged on home purchases on a permanent basis?”
Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented: “Ironic, perhaps, that a delayed Budget should deliver a delayed stamp duty holiday deadline, which does little more than delaying the inevitable reality that awaits the market when the reprieve does finally end.
“Those brave enough to tackle the huge market delays already being seen should do so now as there are very dark clouds building in June. While a staggered return to normality is likely to reduce the impact of the current cliff edge, it’s still likely to bring a shower of transaction fall throughs and house price decline down on the market.”
Founder and CEO of GetAgent.co.uk, Colby Short, commented: “The Budget is fast becoming the government’s equivalent to Groundhog Day, full of headline-grabbing announcements to benefit homebuyers and fuel demand, with little to no intent on addressing the issue of supply.
“It’s as if each time the Budget roles around, the Chancellor looks at the consistent failings of his predecessors and says to the Prime Minister, ‘hold my briefcase’, as he looks to go one better. Or worse, as the case may be.”
What was missing?
James Forrester, Managing Director of lettings and estate agent Barrows and Forrester, commented: “Extremely disappointing to see the Government maintain their head in the sand stance on building more homes.
“They usually talk a good game with regard to house building and we often hear dramatic cries of ‘build, build, build’ when the Budget rolls around. Unfortunately, the only thing that has been built is the suspense waiting for them to deliver on these promises.
“This time around we didn’t even see the usual empty rhetoric and hot air, so we can assume that they will continue to ignore what is perhaps the biggest problem currently impacting the housing market.”
Co-Founder of UniHomes, Phil Greaves, commented: “Great news to see that for once, the government has decided to ease the pressure placed on the throats of hard pressed landlords in recent years, with no increase in capital gains tax announcement and no further tax relief reductions.
“Deterring landlords will only ever reduce the level of rental stock available to satisfy the huge number of people reliant on the sector in order to live. Let’s hope the government has now realised that without landlords providing the infrastructure that underpins much of our social housing they will end up with a rental crisis of their own making.”
Will Brits look to buy abroad?
Christopher Nye, Senior Editor at Propertyguides spoke to Business Leader about whether those looking to move abroad will be tempted to do so following today’s Budget announcement: “After a year in which British people were unable to move to or buy a property abroad, there are two elements of today’s Budget that will offer help.
“Firstly, support for the UK housing market. For many British people their plans to retire abroad, or buy a holiday home, depend on downshifting from family homes or selling up entirely. So the extension of the stamp duty holiday and the Mortgage Guarantee Scheme both supporting home buyers in the UK and helping to prop up property values appears to be good news.
“Secondly, the extension of the furlough scheme and support for the self-employed until September means that homeowners in the UK in previously safe jobs, and careful savers, will not be placed under intolerable pressure while waiting for the economy to recover and their jobs to return. This will give potential overseas homebuyers every chance to continue their plans to buy abroad.”
Frank Pennal, CEO of Close Brothers Property Finance Division, the specialist development finance lender to the property industry, and part of Close Brothers Group plc, comments on the Budget 2021:
In response to the SDLT holiday extension: “Extending the stamp duty holiday is a very sensible move – ensuring the estimated 193,198 sales currently in the pipeline are not lost when lockdown is fully lifted will mean ‘normal’ market conditions can resume. The property industry has been an engine for economic growth during the pandemic and this decision will enable that momentum to continue.”
Nick Sanderson, CEO, Audley Group, said: “The stamp duty holiday was implemented to get the marketing moving and wouldn’t easily withstand the shock of an immediate cancellation which the Chancellor has rightly recognised. However the stamp duty holiday has succeeded in some parts of the housing market but not all of it. Yet this Budget focuses on targeted measures at the wrong end of the market. 95% mortgages will primarily benefit first time buyers. But there is no support for those downsizing or moving into housing with care. Supporting this end of the market would have a significant impact on the whole housing market, but has been largely neglected. This is a missed opportunity.”
What affect will the budget have on Business Rate Relief and what that will that mean for landlords?
Ryan Jones, Business Rates Partner at Cluttons
The current business rates holiday has provided businesses, many of whom have been forced to close or suffered a significant impact on their income, with the means to fight for their survival. However, landlords who have empty properties or who have lost tenants during the pandemic have not received the same level of financial support from the government. What support can business owners and landlords expect from the government once the current business rates holiday ends?
It is widely anticipated that the Expanded Retail Discount 2020/ 21 scheme which has provided 100% rate relief for eligible occupied premises, will be extended beyond 31 March 21. Scotland has already announced that there will be at least a three-month extension to their equivalent scheme, giving some comfort to those concerned over their rate liability beyond the end of the financial year.
On 3 February 2021, the Treasury made a written ministerial statement to parliament asking billing authorities to consider waiting until after the budget has been set down before issuing bills for 2021/22 signalling further relief will be awarded to struggling occupiers of commercial property.
Reliefs granted during the last 12 months almost exclusively afford relief to occupiers. Those who have been forced to close have been worst affected during the Pandemic.
However, for owners and leaseholders of vacant commercial property there has been little support and their rate liability is still payable and there is not expectation that this will change in when the budget is announced.
What does this mean for landlords?
Under the current Non-Domestic Rating (Unoccupied Property) (England) Regulations 2008, once a retail or office property has been physically vacated a three-month exemption (six months for warehouses) will be afforded to them.
These regulations were designed to encourage the occupation of vacant premises and remain in force. What also remains since their inception, is that not many landlords want an empty property on their hands!
If you, as the owner of a commercial property become aware of a struggling business or that the business has vacated or worst case fall into administration, you should monitor the physical occupation of the property so that you are not caught out when you receive a rate demand on the properties returned to you. Rate relief runs with the property and not the person entitled to occupation, therefore for landlords and owners you should be mindful that if a property is returned to you and the previous leaseholder may have claimed 3 months relief you will not be entitled to further relief.
If you are currently holding any vacant commercial property where your initial period of relief has been eroded or are aware that you will be faced with an empty rate liability soon, it is important that you plan for this and we can advise to maximise any savings available to you.
Nick Sanderson, CEO, Audley Group, said: “The stamp duty holiday was implemented to get the market moving and wouldn’t easily withstand the shock of an immediate cancellation which the Chancellor has rightly recognised. However the stamp duty holiday has succeeded in some parts of the housing market but not all of it. Yet this Budget focuses on targeted measures at the wrong end of the market. 95% mortgages will primarily benefit first time buyers. But there is no support for those downsizing or moving into housing with care. Supporting this end of the market would have a significant impact on the whole housing market, but has been largely neglected. This is a missed opportunity.”