The March 2020 Budget - originally scheduled for November last year - has become the focus of great speculation for members of lots of industries in the UK.
In terms of economic policy it hasn’t always been clear the direction that Boris Johnson wants to go. This will be the first Budget since the Tories won a majority, and since parliament agreed to leave the EU. This moment therefore offers an opportunity for Boris Johnson to really lay out his agenda to the public.
The housing sector in particular is ready to receive a clear indicator of direction. Brexit and political uncertainty have done a lot to knock confidence. (Not to mention the ‘revolving door’ of the housing ministership, and the resignation of chancellor Sajid Javid.)
We’re hoping the government takes the Budget as an opportunity to act on its promises for the housing sector. These are the things we’ll be looking out for in the announcement:
The only concrete plans laid out in the Tory manifesto referred to an increase in stamp duty tax for non-resident buyers. The theory here is that disincentivising foreign investment will leave the market more affordable for local people, and reduce the number of empty properties.
However, last summer Boris Johnson also hinted at much larger and wide-reaching changes. During his leadership campaign he announced that he would consider raising the threshold for paying Stamp Duty to £500,000. He also speculated about cutting the top rates of the tax from 12% of the property price to 7%. Both these changes would provide significant savings for home buyers. We’ll be interested to see whether these suggestions are put forward in the March 2020 Budget.
Stamp Duty relief would make moving house more accessible, particularly for those living on state pensions. Recent research found that about a quarter of retirees were put off downsizing by the cost of Stamp Duty taxes. Encouraging downsizers would increase the supply of larger homes for ‘second-steppers’, and provide an effective way for individuals to access equity that could supplement their pensions.
Undoubtedly the UK currently has an affordability problem when it comes to getting first time buyers on the property ladder. People aged 35-44 are three times more likely to be living in a rental property than 20 years ago. The average first time buyer deposit for properties in London is over £100,000.
We expect to see confirmation of initiatives to relieve this problem in the Budget. The government has been seeking consultation on it’s plan for a ‘First Homes’ scheme. This scheme hopes to provide discounted housing to local people and key workers.
There will be a lot of scrutiny of any plans designed to support first time buyers put forward in the Budget. Previous Conservative promises for discounted ‘Starter Homes’ proved hollow. In the 5 years of the scheme, none of the 200,000 proposed new homes were built. Moreover, the ‘Help to Buy’ scheme has exacerbated the issue of unaffordability by encouraging developers to inflate the price of new build housing. Many are now finding their help-to-buy home is not worth as much as they paid for it.
Any new schemes for first time buyers will have to prove they can provide a more effective solution.
There’s been a lot of talk about improvements to infrastructure in the build-up to the Budget. Boris Johnson has more-than-slightly hinted at ‘transformative investments’ into transport and infrastructure. Although not specifically housing related, these changes will have a key impact on the property sector.
With promises that the Budget will provide significant increase of investment and infrastructure into the North, the property market there are set to reap the benefits. HS2 is an easy example. The increased access to northern cities, and economic injection into the region, will cause an increase in property value and encourage further property development in key centres like Birmingham, Manchester, and Leeds.
There was discussion of including proposals for a potential ‘Mansion Tax’ in the new Budget along with a revaluation of council tax rates. However, since the change of Chancellor it seems that Boris Johnson has moved away from these ideas, and Rishi Sunak is said to have shelved them. We would be surprised to see these policies reappear, but are not ruling out the possibility.
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