What does the Chancellors budget mean for property investors?

Rishi Sunak, Chancellor of the Exchequer, gave his budget spending plan today, for navigating out of the Covid-19 pandemic which has led to increased levels of public spending over the last year. The general approach, is that spending will remain higher than average for the next year, before measures are introduced in order to reduce the level of government spending while still growing the economy.

While the budget covers lots of ground, we thought we’d focus on the property industry, and more specifically, what it means for property investment.

Update on the Budget 2021 from Thomas Rigg Wealth Management

Stamp Duty Holiday Extended

The Stamp Duty holiday for homes under £500, 000 has been extended until 30th June 2021 in England and Northern Ireland, and the stamp duty-free amount will decrease to £250,000 until the end of September, with the pre-Covid stamp duty threshold of £125,000 being reintroduced on the 1st October 2o21.

The key takeaway here is, if you’ve been thinking about investing in property, the best time really is now. If you’re buying a property when you already own one, you’ll be subject to the 3% second home stamp duty, but with the stamp duty holiday there is still potential to make a massive saving by buying property now, rather than buying after September 30th.

Government to underwrite high Loan to Value (LTV) mortgages

The chancellor has also announced that the government will guarantee mortgages of up to 95% which will help get first time buyers who do not have a substantial deposit to get on the property ladder with just a 5% deposit. A number of banks have already committed to offering these mortgages, including Lloyds, Natwest, Santander, Barclays and HSBC with Virgin Money reportedly following ‘shortly’.

How does this benefit investors?

Well, with the government making a commitment to guarantee these loans, if house prices were to drop, they would lose money in repossession cases where the sale of a property might not cover the amount of loan that was taken out to pay for it. This would be a disaster, so it’s in their best interests that property prices remain high which in turn can give confidence to those who already have investment interests in property.
 

The Chancellor’s Budget highlights

• Extended Stamp Duty holiday from March 31st – June 30th
• The government to underwrite high LTV mortgages to help first time buyers get on the ladder with small deposits
• No increase in income tax
• Furlough extended until the end of September
• No additional alcohol duty, and planned fuel duty hike scrapped
• Universal Credit uplift to continue for 6 months
• No corporation tax increase until April 2023 when it will only affect the top 10% of businesses
• Business rates 100% reduction extended until June
• 5% VAT reduction extended by 6 months