With Rishi Sunak poised to deliver his Budget tomorrow (Wednesday 3rd March), our in-house property expert, Russell Quirk, has outlined his thoughts on what areas of property the Budget is likely to touch on, and what this means for the industry and its customers alike.
“The most important Budget of a generation? Well, we hear this line a lot and may have been sold it off the back of Brexit, too. However, the fact remains that tomorrow’s Despatch Box speech will be a crucial one.
“The Covid pandemic is still very real, but most of us are reconciled that the UK vaccination progress is a success so far and is aggressively diminishing the virus and indeed its threat – especially to the vulnerable in society. Talk then, of course, turns to economic recovery.
“This falls into two camps – how to stimulate GDP growth and consumer spending; and how to recoup the £300bn that Rishi Sunak has borrowed to stave off the worst effects of the pandemic fiscally.”
Expect Further Stimulus
What discussing what to expect from the Budget, Quirk believes we’ll see more government stimulus instead of a start to the process of raising taxes to recoup some of the money spent on initiatives like furlough and the stamp duty holiday.
“In so far as tax-take,” Quirk says, “Rishi will at some point face the wrath of the Conservative backbenches and indeed their middle-England base as he starts to squeeze corporation tax, income tax thresholds, CGT, etc to recoup monies enough to start to pay off our debts.
“We expect to see a three-month extension to the stamp duty holiday – pushed out to the end of June, saving 100,000 more buyers an average of £4000 in tax, up to a maximum of £15,000 assuming the rule changes of the last few months prevail.”
As well as an extension to the stamp duty holiday, Sunak is expected to announce a new government-backed mortgage scheme. But while this sounds like good news for many, Quirk is quick to point out that government-backed initiatives are actually paid for by the tax-payer.
“The mortgage deposit guarantee scheme – or ‘Boris Mortgages’ as we are calling them. In essence, buyers pay just a 5% deposit on any purchase up to £600,000 with the Government (also read tax-payer) providing a guarantee to lenders for around 20% of their exposure. This scheme is not thought to be confined just to first-time buyers nor to new homes only. It’s a ‘free for all’.”
First-time buyers left behind
While Quirk expects these government interventions to have the desired effect on the property market, he also notes that, by and large, the people who the government claims to be helping are actually the very ones being left further behind by these initiatives.
“Our belief, also given the continuing low cost of money in Bank of England and mortgage rate terms, is that the Government’s interventions will fuel further house price rises and transaction growth during most of 2021. Yet, some would-be first-time buyers may be perplexed that the further consequence of these measures will be to price them further out of the market as house prices rise further.
“I suppose that Boris and Rishi are damned if they do and damned if they don’t, really.”
If you have any questions about how the Budget is going to change your experience on the housing market, drop us a message in the comments section below and Russell will be quick to get back to you.