In yesterday’s Budget announcement, Chancellor Rishi Sunak announced the furlough scheme will be extended until September 2021.
Neil Cobbold, Chief Sales Officer at PayProp, comments on this news: “(Yesterday’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.
Ben Beadle, Chief Executive of the National Residential Landlords Association (NRLA), said: “The Chancellor’s pledge to do whatever it takes to support those affected by the pandemic will ring hollow for thousands of tenants and landlords across the country.
“The Government has admitted that private tenants have been hardest hit by the pandemic, and figures show that most of those in arrears are unable to access emergency housing support from local authorities.
“Despite this the Chancellor has failed to provide the sector with the financial support needed to pay off rent debts built as a consequence of the virus.
“Without help to get arrears cleared, many tenants face the prospect of losing their homes and having damaged credit scores, which will undermine the Government’s efforts to help generation rent become generation buy.”
Robert Nichols, CEO of Portico, comments: “It is also very welcome news that the furlough scheme has been extended, as well as the uplift to Universal Credit. These moves combined will continue to provide some much needed confidence in such extraordinary times and, together with the Stamp Duty holiday and the new mortgage guarantee scheme, buyers, renters and sellers can rest easier and plan their moves with less to hold them back.”
Chancellor Rishi Sunak has announced an extension to the Stamp Duty holiday in yesterday’s Budget announcement. It will now be available until the end of June.
Andy Sommerville, Director of Search Acumen, comments on the drawbacks of this extension: “(Yesterday’s) Stamp Duty extension is not just welcome news for thousands of homebuyers-in-waiting. Extending the Stamp Duty holiday is also a tonic for thousands of conveyancers who have been under pressure to complete due diligence on an industrial scale against a pressing deadline, and risking burnout at a time when businesses are still under Government instructions to work from home.
“However, the Chancellor’s much-anticipated move simply defers rather than dodges the cliff-edge by putting it off until June. The Stamp Duty holiday has once again shown the flaws in traditional working practices and flagged the need to future-proof the property market with a data-driven approach to drive transactions through to completion.
“Given the technology at our fingertips, no homebuyer in 2021 should have to wait for weeks at the back of a queue for due diligence to be completed. Neither should any conveyancer have to apologise to their clients for delays caused by a system clearly past its sell-by date. Innovations like our Data Snapshot tool are crucial to shifting the transaction process up a gear by providing instant access to risk data accompanied by insurance, to help buyers avoid being caught in the Stamp Duty crush in three months’ time.”
Dale Anderson, MD of Fabrik Invest, comments: “The Stamp Duty holiday extension is excellent news in terms of the keeping the market moving. However, we need to move forward with a note of caution, as false inflation keeping the market moving is far from ideal.
“Overall, I expect a short-term dip in prices in certain parts of the country – specifically the prime London and Manchester city centre markets. We’re likely to see home owners and investors looking for better value outside of these areas instead.
Bryan Mansell, Co-Founder at Gazeal, comments: “The Chancellor’s Budget inevitably focused on extending much-needed support in response to the COVID-19 pandemic. However, as we move through 2021, the Treasury’s focus is likely to turn to closing the spending gap caused by the health crisis.”
“The announcement of a three-month extension to the Stamp Duty holiday – and a higher tax threshold until September – will generate plenty of headlines as, according to Rightmove, it will facilitate an additional 300,000 transactions and £1.75 billion of savings.”
“Although it’s positive to see the Government listen to the views of agents and conveyancers on the coalface, as well as the property-buying public, more consideration should have been paid to calls for a more specific tapered end to the tax cut.”
“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.”
“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.”
Spring Budget announces Stamp Duty holiday extension
Craig Vile, Director of The ValPal Network, comments: “The Stamp Duty holiday extension is positive news for estate agents and consumers. A three-month extension – and additional support until September – is longer than most property professionals would have anticipated.”
“Additional completions as a result of the Stamp Duty holiday extension, which otherwise could have fallen through, provide agents with an opportunity to increase their commission levels over the next three months.”
“The general buzz around the property market can now continue as we move towards the traditionally busy spring/summer market. Moreover, the end of the Stamp Duty holiday should also now coincide with fewer COVID-19 restrictions and hopefully a return to something closer to normality.”
“There are, however, some concerns over the extension of the Stamp Duty holiday. Firstly, if there is no tapered end, thousands of buyers could miss out on tax savings and there could be a drop-off in market activity.”
“Secondly, there are concerns that the Stamp Duty holiday has artificially inflated property prices. Agents must therefore consider the impact another six months of Stamp Duty savings could have on average prices for the rest of the year.”
“In other housing news, it’s pleasing to see that Boris Johnson’s plans to help ‘Generation Rent’ become ‘Generation Buy’ are taking shape with the launch of the 95% mortgage guarantee scheme.”
“This scheme should help to provide another demand boost for agents. However, whether there will be enough supply to meet rising demand is another matter entirely.”
“As we hopefully move away from the COVID pandemic over the coming months, the Government needs to return its focus to addressing the UK’s housing supply shortage.”
Robert Nichols, CEO of Portico, comments: “The property purchase tax suspension for the first £500,000 of all property sales throughout England and Northern Ireland has been extended until the end of June, with the nil rate band of £250,000 – double its standard level – continuing until October 2021.
“The extension of the Stamp Duty holiday is welcome news, especially for the hopeful homebuyers who have been racing to complete this month. This news will make theirs and other new market entrants’ first purchases much more financially attractive, with big savings to be had. It may also incentivise older homeowners to downsize, which could free up some of the capital’s existing housing stock, as according to sources, nearly nine million bedrooms in the homes of older people are lying empty.
“The success of Stamp Duty holiday thus far does magnify just how much the current form of property taxation inhibits buyers. Suspending this taxation is giving the sector some much needed momentum and makes entering the market a far more realistic dream for many hopeful homeowners.
“The important thing for buyers and sellers to do now is act fast. Three months may seem like a substantial amount of time, but with increased mortgage applications dragging through the system, loan delays could still increase the risk of transactions not completing in time.
“So, don’t delay. Get moving on your plans quickly to prevent a stressful wait with a looming deadline and ensure that you maximise your potential savings without undue panic.”
Ahead of the Budget on 3rd March, the National Residential Landlords Association (NRLA) is calling for tax reform to support energy improvements for rented homes.
This comes as MPs on the Environmental Audit Committee concluded last week that the delivery of the Government’s flagship Green Homes Grant scheme has been “poor”. It noted that the eligibility criteria for the scheme: “prevented many from being able to access vouchers for the measures they required.”
The NRLA highlights that 32% of properties in the private rental sector (PRS) were built before 1919, making it a huge challenge to improve energy efficiency compared with any other housing sector.
The Government has committed to upgrade as many PRS homes as possible to Energy Performance Certificate (EPC) Band C or better by 2030. Currently, 62% have an EPC rating of D or lower.
The NRLA is calling on the Chancellor to help achieve this by ensuring that the tax system actively supports landlords who want to make energy improvements. Ministers have proposed to increase the amount up to which landlords have to pay to make a property more energy efficient from £3,500 to £10,000.
According to Government data, the average gross rental income for landlords is £15,000 per year (before tax and other deductions). The NRLA is concerned that the impact of this change is likely to decimate the income of some landlords. It proposes that energy efficiency measures carried out by a landlord should be offset against tax at purchase, as repair and maintenance, rather than as an improvement at sale against Capital Gains Tax. This would address anomalies – for example, whilst replacing a broken boiler is tax-deductible, replacing an energy-inefficient model for a more efficient boiler or heating system is not.
Ben Beadle, Chief Executive of the NRLA, comments: “The rental market stands ready to play its part in securing a green recovery. However, to achieve this we need a tax system that properly supports and encourages the work needed to ensure rented homes as are energy efficient as possible on a long-term basis. The Green Homes Grant scheme proves that short term measures do not work.
“The Chancellor needs to use tax more positively to encourage investment in energy improvements. This would play a crucial role in cutting bills for renters, reducing carbon emissions, and improving the nation’s housing stock.”
The Spring Budget 2020 was announced yesterday, with the following changes made affecting property investors in the UK:
A Stamp Duty surcharge has been confirmed for overseas buyers
Milton Rodosthenous, Build to Rent expert and director of online auction service LetsBid Property, comments: “The stamp duty surcharge for non-UK tax residents represents positive news for domestic property buyers and landlords. Competition from overseas buyers – which has been rife in recent years, particularly in the UK’s largest cities – is likely to reduce significantly.
However, the additional tax could pose problems for the Prime Central London market, in which there is currently a huge amount of overseas investment. The market has been struggling for several years since George Osborne’s stamp duty reforms in 2014 and this latest move could see a further reduction in prices and activity.
Actively discouraging overseas investment with a 2% surcharge could be troublesome. Perhaps a 1% surcharge on overseas buyers – as originally mooted by politicians – would be fairer and more effective in creating a level playing field for all property purchasers?”
Mary-Anne Bowring, group managing director at residential property consultancy Ringley, says: “The falling pound has made housing more affordable to overseas buyers, while domestic buyers have had to contend with stagnant wage growth and ultra-low interest rates pushing up prices and eating away at their ability to save.
“An increased Stamp Duty for overseas buyers will simply put things back to where they were before the Brexit vote and level the playing field for domestic buyers.”
Neil Cobbold, Chief Sales Officer at PayProp, comments: “An additional 2% Stamp Duty surcharge for overseas investors will certainly have an impact on the demand for properties in England’s major cities. We will have to wait and see whether disincentivising overseas buyers causes a shortage of rental homes in the long-term.
“However, additional revenue from this surcharge could pave the way for a reduction or overhaul of the current 3% levy on second homes and buy-to-let properties.
“Changes of this type – and reduced competition from overseas – would encourage more domestic landlords to invest in further properties and provide more homes for the growing tenant population.”
Mark Hayward, Chief Executive of NAEA Propertymark comments: “If introduced, this policy allows those in the UK to have a better chance at purchasing a home. However, overseas buyers tend to purchase properties in prime central London which are completely unaffordable to most homebuyers anyway. Therefore, this move will not help those that need it most.
“Ultimately, by energising surcharges, it is likely that purchasers will factor this additional cost into any offers they make on a property so prices may be pushed down in areas where overseas buyers are purchasing.”
Stamp Duty changes within the UK
Milton Rodosthenous, Build to Rent expert and director of online auction service LetsBid Property, comments: “Many consumers and indeed property professionals would like to have seen changes to stamp duty rates in today’s Budget. This would have given the market a further boost following the increased activity we have seen in the first few months of the year post-election and post-Brexit.
“Those keen for stamp duty reform will now have to wait, but it could only be a matter of time as it’s clear from his previous comments that Boris Johnson has designs on overhauling the current stamp duty system.
“Meanwhile, it was surprising not to see stamp duty relief for first-time buyers confirmed as a permanent policy. This initiative has been highly successful and contributed towards many younger people no longer feeling that homeownership is out of reach.”
“Moreover, reviewing council tax levels would have been a significant and lengthy project to complete, but it has been much needed for a while as average property prices have spiralled since the existing levels were set.
Additional revenue from new council tax rates could have been used to pave the way for a stamp duty shakeup, which could save money for movers and encourage more transactions at the mid to higher end of the market.
Asaf Navot, CEO of London prop-tech lettings company, Home Made stated: “Despite the government’s claim of its commitment to fixing the UK’s housing crisis, this budget offered little to no immediate relief from taxation for landlords.
“The 1% drop in the stamp duty surcharge for investment properties does reduce some of the taxation landlords face. However, without harder-hitting measures on stamp duty, and the reintroduction of buy-to-let mortgage interest relief, it does little to increase the rental supply or benefits to landlords.
“With more people renting, and for longer, bold solutions are required to fix the housing crisis. In the next budget, the government must focus on reducing taxation further to encourage more landlords into the market and incentivise developers to build more homes to meet rising demand. Additionally, it is imperative that we reduce the transition of long-term rentals to short-term lets to avoid impacting the rental market further.
“While it is politically logical to pursue government-led initiatives to boost levels of homeownership, more needs to be done to ensure we are encouraging development of quality housing, supporting good landlords, and enforcing compliance, to provide properties that suit the variety of ways people choose to live in the 21st century.”
As well as changes to Stamp Duty, the following were discussed in yesterday’s Spring Budget announcement:
Government’s commitment to extend the Affordable Homes Programme
Tom Slingsby, chief executive of property developer Southern Grove, says: “This cash boost for affordable homes will underpin building for many years to come and is a declaration of war on a housing crisis that isn’t going away.
“Only sufficient provision of affordable homes in the right areas can prevent the sort of social inconsistencies that appear when high property prices put key areas of UK cities off-limits to younger workers and their families.
“We know from conversations we have constantly with housing
associations that the appetite is there to keep building through economic
cycles and this fund will ensure that will happen.”
Henry Verrill, Head of Valuations at estate agent Nested comments: “Today’s budget contains welcome announcements for the housing market. The interest rate cut, though principally in response to COVID-19, stands to benefit those on variable rate mortgages and buyers looking for fixed-rate deals.
“And the £12bn set aside for the affordable homes programme – combined with a further £1.1bn for the building of up to 170,000 new homes – is good news for those planning to take their first steps onto the housing ladder in a market where the cost and level of supply is a well-known issue.
“We’re particularly pleased to see £1bn designated to the new building safety fund – a fund which will help ensure the removal of unsafe cladding from apartment blocks.
“This continues to be an important issue for Nested’s clients and this measure will provide a degree of reassurance to buyers and sellers of flats across the country. Whilst it’s too early to tell whether the sums allocated will be enough, it’s certainly a step in the right direction.”
Renters’ Reform Bill
Neil Cobbold, Chief Sales Officer at PayProp, comments: “The lettings sector would have been relieved to hear further details of this legislation, along with a clearer timetable for property professionals to work to.
“Removing Section 21 from the Housing Act 1988 is a huge change to the evictions process. It’s vital that input from the industry is considered when this measure is debated in Parliament in order to get the best outcome for all parties.
“Lettings professionals will also want to see how the court system will be reformed to oversee the new system.
“The introduction of lifetime deposits could have a range of advantages for the rental sector – and particularly for renters. However, it will be important for politicians to consider input from the sector when deciding how a new deposit system could work.”
Building Safety Fund to remove unsafe cladding from all UK buildings above 18m
David Westgate, Group Chief Executive at Andrews Property Group, comments: “The announcement of a £1bn Building Safety Fund will be welcomed by leaseholders living in high rise blocks around the UK.
“The key issue, as ever, is how quickly the funds can be called upon and if there are any specific criteria that must be met for developments to be eligible.
“The funds have officially been made available but the logistics have yet to emerge. In the meantime, many people’s lives have been put on hold as they cannot secure mortgage finance and they cannot sell their homes.
“What’s also vital is that the new fund covers rendered insulation as well as combustible cladding.
“In our experience, the cladding issues we are seeing around the UK could soon be surpassed by the problem of rendered insulation.“If we are to genuinely make every apartment and housing block in this country safe then the newly announced fund needs to cover all materials that are deemed to be unsafe, not just cladding.”
Lack of investment to help the issue of homelessness and boost homeownership
Jon Sparkes, chief executive of Crisis, said: “Missing from today’s Budget is bold action to prevent people from being forced on the streets in the first place, such as clear targets for increasing the supply of social housing and restoring housing benefit to cover the cost of rent.
“Rough sleeping is the most brutal and devastating form of homelessness and while the additional funding announced to tackle this is much needed, a dark cloud remains over the Government’s ability to end rough sleeping within this Parliament without tackling its root causes.
“The lack of investment in housing benefit is a complete missed opportunity for the Chancellor to free some of the most vulnerable people from the grip of poverty.
“The upcoming Spending Review must restore housing benefit to cover at least the lowest third of rents – the Government cannot continue to look the other way while people are forced into homelessness under the constant pressure of rising rents and low incomes.”
In a joint statement, the Residential Landlords Association and the National Landlords Association said: “The Government is undermining its own efforts to boost homeownership through its attacks on the private rented sector. By choking-off supply and making renting more expensive it is tenants who are hardest hit.
“Ministers need to wake up to the reality of the damage their tax measures are doing to the private rented sector and support landlords to provide the new homes for private rent we desperately need.”
The decline in the supply of rental housing remains an issue in the UK, and landlords say the Chancellor needs to use his first Budget to take immediate action.
More properties are being sold by landlords than purchased, and others are making the decision to switch to short-term holiday lets for tax reasons. Therefore, unless action is taken, tenants are going to find it increasingly hard to find the home they want.
Investment in new rental properties has been slowed by the introduction of measures such as the 2016 3% Stamp Duty levy, knocking the confidence of landlords across the country.
The drain in rental accommodation is only made worse by an incentivisation from the tax system for landlords to switch their properties to short-term lets. As a result, ARLA Propertymark is warning that almost half a million homes could be made unavailable for tents in need of long-term homes to rent.
In their submission for the Budget, the Residential Landlords Association (RLA) and the National Landlords Association (NLA) argue that the tax system entirely contradicts the Government’s housing objectives.
The RLA and the NLA are calling for a fundamental review of the way rented housing is taxed to ensure that tax policy supports, rather than contradicts, government objectives. Their proposal is for the Stamp Duty levy to be dropped where landlords add to the net supply of housing through developing new properties. This includes bringing empty homes back into use or converting large properties into smaller, more affordable units of accommodation.
The associations also propose that tenants are supported into homeownership by introducing a Capital Gains Tax exemption for when landlords sell a property to a sitting tenant.
In addition, they are calling for tax relief for landlords investing in measures to improve the energy efficiency of a rented property or those who let adapted properties long-term to tenants with accessibility needs.
David Smith, Policy Director for the RLA, comments: “The tax system for rented housing is failing. It encourages the provision of holiday homes over long-term properties to rent, it deters investment in new housing and provides no support to those wanting to make energy efficiency improvements.
“For the sake of those living in rented housing or who are looking for accommodation, Ministers need to use the Budget to urgently change course to ensure that their tax policies are positively aligned with their wider housing objectives to encourage good landlords to provide long-term affordable housing.”
Chris Norris, Director of Policy and Practice at the NLA, said: “The tax system with which landlords must contend is no-longer fit for purpose. HM Treasury has constructed a series of barriers to investment, which make running an efficient and successful lettings business borderline impossible.
“As he prepares his first Budget, we hope that the Chancellor will take the opportunity to use taxation to encourage investment in new and existing homes alike. Mr Sunak must recognise that housing costs can only be reduced by making it easier, not harder, to provide good quality rented homes.
“The emphasis must be on finding solutions and encouraging investment across tenures amongst a diverse range of providers.”
