Chancellor Rishi Sunak has announced a Stamp Duty holiday, raising the level at which the tax is charged to £500,000 of all property sales in England and Northern Ireland.
The tax threshold has been temporarily raised until next March to boost the property market and help buyers struggling because of the coronavirus crisis.
The changes have come in with immediate effect.
This means that you could now save thousands of pounds when purchasing your next home – making it the ideal time to buy
The average home currently costs £248,000 – with the changes announced you would save £2,460 in stamp duty costs when purchasing a home of this value. Anyone completing on a main residence costing up to £500,000 between 8 July and 31 March will not pay any stamp duty, and more expensive properties will only be taxed on their value above that amount.
Essentially, the more the property that you are buying is worth – up to £500,000 – the more you save, with potential savings of up to nearly £15,000 pounds. With the recent upsurge in property enquiries after the lockdown period, selling your property and finding your new home has never been easier.
UK PM vowed to “use this moment” to fix longstanding economic problems and promised a £5bn “new deal” to build homes and infrastructure.
In a wide-ranging speech in Dudley, in the West Midlands, Mr Johnson vowed to “build, build, build” to soften the “economic aftershock” of coronavirus.
He said the government wanted to continue with its plans to “level up” – one of its main slogans of last December’s election – as “too many parts” of the country had been “left behind, neglected, unloved”.
Infrastructure projects in England would be “accelerated” and there would be investment in new academy schools, green buses and new broadband, the PM added.
Projects in the £5bn investment plan include:
£1.5bn for hospital maintenance and building, eradicating mental health dormitories and improving A&E capacity – the government said this is “new” money in addition to £1.1bn in its Spring Budget
£100m for 29 road projects including bridge repairs in Sandwell and improving the A15 in the Humber region – this money had already been announced
Over £1bn for new school buildings, as announced on Monday – this cash comes from the government’s existing infrastructure plan
£12bn to help build 180,000 new affordable homes for ownership and rent over the next eight years – brings together three pots of money already announced by previous Tory governments and Mr Johnson’s administration
Other projects announced in the government’s Spring Budget, which will now be accelerated, include:
£83m for maintenance of prisons and youth offender facilities, and £60m for temporary prison places.
£900m for “shovel ready” local projects in England this year and in 2021
£500,000 – £1m for each area in the towns fund to spend on improvements to parks, high street and transport
The UK has set itself a target of net zero greenhouse gas emissions by 2050, but that will be a challenge for the housing market.
As things stand, domestic housing accounts for nearly 20% of the UK’s carbon emissions. At the same time, there are few ‘green’ mortgage products and even fewer that have been set up to fund making homes more energy efficient.
This matters, because upgrading current buildings will be what helps cut emissions.
According to the UK Green Building Council, around 80% of the buildings that will exist in the UK in 2050 are already constructed.
Few of those are energy efficient. Based on the government’s energy performance certificates (EPC), most of the UK’s housing stock is in the middle, ‘D’, band.
Top of the list in making housing more energy efficient is cutting fuel use. Around 10% of the UK’s carbon footprint comes down to heating – mostly domestic heating.
In principle, green mortgages that help homeowners manage the cost of boosting energy efficiency should be widespread and keenly priced.
Two roads in Rochdale have been painted with messages to thank key workers from medical staff to care workers, social workers, waste operatives and many more for the great work they are doing during this awful pandemic. The markings are now down at Whitehall Street at the approach to Rochdale Infirmary and outside Birch Hill Hospital.
Economists and housing experts are forecasting UK-wide price falls of up to 13%, with “brutal” declines in some areas, as the property market struggles to rebuild during the coronavirus crisis.
The range of forecasts from the major researchers is markedly wider than usual. At one end is the Centre for Economics and Business Research, which predicts that 2020 prices will be down by 13% “as a lack of transactions, high uncertainty and falling incomes take their toll”. But the estate agent Savills said the hit to the market could be more like 5%, and a third of valuation surveyors are predicting that price falls may be limited to 4% or less.
The post-lockdown market will be a buyer’s market, said Jonathan Hopper of Garrington Property Finders, as he forecast falls of 10% nationally and 15% in some areas.
“Areas with a more resilient jobs market should see values hold up better, but elsewhere the price correction could be more brutal,” he said.
Knight Frank, in a revised forecast issued this week, said it anticipated a fall of 7% in 2020, more than its earlier forecast of 3%. Its analysis suggested prices had already fallen 5% since March, with a further downtick to come.
In England the February data shows, on average, house prices have fallen by 0.6% since January 2020. The annual price rise of 0.8% takes the average property value to £246,341.
The regional data for England indicates that:
the South West experienced the greatest monthly price rise, up by 0.5%
the East Midlands saw the most significant monthly price fall, down by 1%
London experienced the greatest annual price rise, up by 2.3%
the East of England saw the lowest annual price growth, down by 1%
UK house prices
UK house prices increased by 1.1% in the year to February 2020, down from 1.5% in January 2020. On a non-seasonally adjusted basis, average house prices in the UK decreased by 0.6% between January 2020 and February 2020, compared with a fall of 0.3% during the same period a year earlier (January 2019 and February 2019).
The UK Property Transactions Statistics for February 2020 showed that on a seasonally adjusted basis, the estimated number of transactions of residential properties with a value of £40,000 or greater was 103,870. This is 6% higher than a year ago. Between January 2020 and February 2020, transactions increased by 4.5%.
House price growth was strongest in Wales where prices increased by 3.4% over the year to February 2020, up from 2.5% in January 2020. The highest annual growth within the English regions was in London, where average house prices grew by 2.3%, this was due to a decrease in average house price between January 2019 and February 2019. The lowest, and only negative, annual growth was in the East of England, where prices decreased by 1% over the year to February 2020.
The coronavirus crisis is affecting buyers and sellers alike. An estate agent talks through the hurdles faced by both parties
Spring and summer are often cited as the best time to buy a property, with the warmer weather encouraging more people to put their homes up for sale. But with the Government having all but shut down the UK’s housing market, buying and selling is challenging during the lockdown – although not entirely impossible.
Here are the questions being asked by buyers and sellers:
Can I still complete?
The Government advises buyers and sellers to “where possible, delay moving to a new house while measures are in place to fight coronavirus”.
However, solicitors are not banned from continuing completions and the Government has accepted some may still have to take place. For those who need to move for reasons such as death, divorce or debt, and for those who want to move perhaps to be in a better school catchment area for their children, there are still some possibilities.
What if I’m looking to buy?
If you are looking to buy, things look great on the face of it. The Bank of England has slashed interest rates to a record low of 0.1 per cent in response to the crisis, meaning mortgages are more affordable than ever as repayments will, in theory, be lower.
However, many lenders have withdrawn tracker mortgages offering the best rates. Savings the banks are making are not being passed onto consumers. Larger deposits are also now required. Nationwide Building Society, one of the UK’s biggest lenders, recently withdrew mortgages with a loan-to-value (LTV) ratio above 75 per cent from sale.
Paul Broadhead, head of mortgage policy at the Building Societies Association, says: “Lenders and borrowers are facing unprecedented conditions. The temporary move away from higher LTV products across the whole market reflects prevailing uncertainty and the fact that physical valuations are on hold. Lenders are focusing on supporting their existing borrowers that have been affected by Covid-19, often with fewer staff available to work.”
What if I need a mortgage?
A downside for buyers is that you have to have 100 per cent of the property’s value in cash to now be in with a chance of securing a property. Assuming you have seen a house you liked before the restrictions came into effect, estate agents are unlikely to put any offers forward where a mortgage is required.
Mortgage valuation surveys are unable to take place during the lockdown because mortgage companies cannot send a surveyor out in person to ensure a property has not been overvalued by an estate agent. This is good news if you are a cash buyer and puts you in an even stronger position with less competition from other buyers.
However, sellers should be aware that cash-rich investors often expect a price reduction, with some offering as much as 30 per cent below the asking price.
What if I’m selling?
If you are looking to sell, it may still be possible. Some agents are making the most of technology and offering virtual viewings and video valuations, with vendors taking their own photos to market their properties.
This sounds great, but it isn’t. Unless you are a professional photographer with a wide-angle lens camera, it’s unlikely you will be marketing your property to its full potential.
It is also doubtful the valuation will be as accurate without the agent having visited. Every property is unique. And while virtual viewings are great for the casual viewer at home who doesn’t have to leave the sofa, they are not so helpful for vendors deciding how keen and motivated a buyer really is.
If an acceptable offer is made, there is even less certainty than usual when it comes to trusting that someone will see the process through to conclusion from sale agreed (subject to contract) to exchange/completion, as they have yet to set foot inside the property.
Some estate agents, such as Purplebricks, charge a fixed fee whether the property sells or not. It is worth noting that according to research firm TwentyCi, Purplebricks received an estimated £18m from 21,380 vendors whose properties were withdrawn having failed to sell in 2019. With actual viewings currently impossible, who knows what their figure for 2020 will be.
Property prices: Where next?
House prices were flat in March, the first time they did not rise in five months, according to the latest data on the UK property market.
Halifax, who compiled the figures, said the housing market began March in recovery mode as political uncertainty about Brexit had passed. Prime Minister Boris Johnson’s election victory had also boosted confidence in the market.
But by the end of the month, the UK was in different territory as coronavirus swept across the country and the property market ground to a halt as the UK was put into lockdown.
Halifax said it was too early to accurately assess the long-term impact of the virus on the UK housing market.
When will the market recover?
Problems with physical viewings and mortgages will make moving house difficult in the short term.
But once the coronavirus crisis has blown over, and the barriers on movement have been lifted, the market should bounce back fairly quickly. After the lockdown is finished, the artificial restrictions on the free market will be released, causing a flood of supply and demand from sellers and buyers.
If furloughed employees are able to return to their place of work on their full salary, consumer confidence will likely be restored. Pent-up demand will hopefully encourage lenders to increase supply of affordable mortgages.
The property market may return to normal sooner than many currently envisage.
By Rupert Gray – an estate agent working in the Greater London area