From stamp duty to 95% mortgages, Priestley Home’s CEO Nathan Priestley picks out some key points from the Chancellor’s budget announcement
The most highly-anticipated budget in living memory, all eyes were on Chancellor Rishi Sunak on Wednesday 5th March as he promised to do “whatever it takes” to boost the UK’s post-pandemic economic recovery.
Amongst the headline-grabbing measures, including the extension of the furlough scheme, the Universal Credit top-up and Income Tax thresholds, were a number of key points with implications for the property sector.
Here Priestley Home’s CEO Nathan Priestley picks out his four key budget takeaways:
Stamp Duty Extension
“The three-month extension of the stamp duty holiday in England and Northern Ireland will keep the property market buoyant and ease financial pressure on buyers who faced the March cliff edge.
“This should also help to avoid a bottle-neck build-up of mortgage approvals and conveyancing, especially as mortgage and legal firms continue to work remotely and recover from the three to six-month pause they experienced during the first lockdown. The extension will alleviate pressure, however, there will still be a cliff edge come July, though it shouldn’t be as disruptive.
“My opinion is that the treasury should abolish the Stamp altogether. In order to boost the economy, it should be made as easy and as painless as possible for consumers to buy things – whether that’s a t-shirt or a house. Make it easy, make it tax-free and activity will grow exponentially.
“To account for the losses, taxes should be increased and added to profits on house sales. Taxing profit is a much more palatable form of taxation, in a similar way to inheritance tax. It’s not a popular option, but when has taxation ever been popular?”
95% Mortgage Guarantee Scheme
“House prices remain high, which is excellent news for the sector. The new government guarantee scheme – which allows homebuyers a mortgage up to £600,000 with a 5% deposit – will be extremely attractive for first-time buyers.
“Finding funds and borrowing is by far the most stressful and cumbersome part of buying property. However, as the government guarantees debt, banks will loosen the reins and be more willing to lend. Their risk is also hugely mitigated. Unlike during a credit crunch or real recession, we are in a period where banks and companies have a massive amount of liquidity, which means low-interest rates. Lenders will be keen to get it out the door.
“This is a great scenario for first-time buyers, but also smart, by ensuring that buyers have skin in the game with a 5% deposit. The last thing we want is the return of 100% or 120% mortgages, which caused the 2008 crash. Lend, but do so responsibly.”
Corporation Tax (plus a new ‘super deduction’)
“Businesses with profits over £250,000 will be charged 25% Corporation Tax from 2023. Clearly, no CEO is going to welcome an increase in taxes, but most will accept it. Again, this is tax on profit, not on income or revenue, and we must play our part in the UK’s economic recovery.
“However, the chancellor also announced a new ‘super deduction’ beginning in April, cutting companies’ tax bills by 25p for every pound invested in new equipment. This is really good news, as it encourages spending, while the government picks up tax on the other side of the transaction, through corporation tax on profits.
“As a basic economic concept it works; encourage the buyer to buy, then tax the seller on profits.”
“The government’s new MMC (Modern Methods of Construction) Taskforce has also sparked interest in the industry.
“It’s been set up to accelerate the delivery of homes in the UK via offsite house building – such as those pre-built in factories by the likes of Yorkshire’s Ilke Homes and Manchester’s Urban Splash – and backed up by £10m of funding from the Ministry of Housing.
“This is a clear indication that the government intends to encourage developers to explore offsite methods to speed up production, helping to solve the housing shortage while also attempting to hit zero-emissions targets.
“The jury is still out on the durability and effectiveness of MMC building, but with the housing secretary stating last year that a fifth of new homes built through the government’s £12 billion affordable homes scheme will use MMC methods, it’s clearly a priority for this government and something developers will be watching closely.”