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Property and energy efficiency in homes has been placed at the heart of the Government’s push to re-start the UK’s economy as it emerges from the coronavirus lockdown.
Landlords, especially those with property purchase and improvement plans, stand to benefit from the wide-ranging package of measures announced by Chancellor of the Exchequer Rishi Sunak this week. These included a temporary stamp duty holiday and a new voucher scheme providing part payment for energy efficiency improvements to homes.
‘This is going to be a green recovery with concern for our environment at its heart’, said Sunack, when delivering his Summer Statement to the House of Commons.
Housing is one of the most important UK sectors when it comes to job creation, he said. ‘House building alone supports nearly three quarter of a million jobs’, while ‘millions more relying on the availability of housing to find work’.
With property transactions falling by 50 per cent in May, and house prices falling for the first time in eight years, something was called for to boost the market.
‘We need people feeling confident – confident to buy, sell, renovate, move and improve’, said the Chancellor.
Hence, a cut in stamp duty by way of an increase in the starting threshold from purchases of up to £125,000 to those of up to £500,000 or more. This change had immediate effect and will stay in place until 31 March 2021. The second-home surcharge, which starts at purchases of up to £500,000, will stay in place.
Meanwhile the new ‘£2bn Green Homes Grant’ will, from September, allow homeowners and landlords to apply for vouchers towards the cost of making their homes more energy efficient by such measures as installing loft, wall and floor insulation.
The grants will cover at least two thirds of the cost, up to £5,000 per household.
‘And for low income households, we’ll go even further with vouchers covering the full cost – up to £10,000’, the Chancellor promised.
Other measures announced by the Chancellor included: grants for businesses that hire new apprentices aged under 25; other training and employment incentives for young people; a programme to make public buildings, including schools and hospitals, greener; putting more money into upgrading and maintaining schools and hospitals; investing in the local roads network, and putting money into court maintenance across England. There is also to be a new Eat Out to Help Out discount scheme that will provide a 50 per cent reduction for sit-down meals in cafes, restaurants, and pubs across the UK from Monday to Wednesday every week throughout August 2020. And the rate of VAT applied on most tourism and hospitality-related activities is to be cut from 20 per cent to 5 per cent.
The temporarily reduced rates of Stamp Duty Land Tax will apply for residential properties purchased from 8 July 2020 until 31 March 2021 inclusive.
The rates that now apply whether buying a main home for the first or later time are:
|Purchase price up to £500,000||0%|
|Purchase price between £500,001 and £925,000||5%|
|Any remaining additional amount above £1.5m||12%|
The special rules for first time buyers have been replaced by the reduced rates set out above.
The higher rates for purchases of additional dwellings, which apply on top of revised main dwelling rates, are now:
|Purchase price up to £500,000||3%|
|The next £425,000||8%|
|The next £575,000||13%|
|Any remaining additional amount above £1.5m||15%|
The SDLT leasehold residential property nil rate which applies to the ‘net present value’ of any rents payable is also increased to £500,000 from 8 July 2020 until 31 March 2021. A 1% rate applies to NPVs above £500,000.
Companies buying residential property worth less than £500,000 will also benefit from the changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.
The Government has a SDLT calculator that allows buyers to work out the stamp duty they will have to pay on any property purchase.
The reduced rates above will revert to the pre-July 8 rates on 1 April 2021.
Property industry reaction to the Chancellor’s announcements on both stamp duty reductions and his Green Homes Grant scheme have been generally favourable.
For Assetz Capital, chief executive Stuart Law, welcomed the changes. ‘There’s no doubt this will have a positive impact on the market and help to partly make up for the larger deposits now required by buyers’, he said. ‘As the first link in the housing chain, first-time buyers are the foundation of the whole housing market, so we support any changes that benefit this group.
‘The government could, and should, go further however, taking a pragmatic view that this change alone isn’t going to fully balance the negative impact of the virus on the housing market.
‘We’d also advocate all of the recent buy-to-let taxes being removed for the next five years, as buy-to-let investors could potentially step in where first-time buyers can’t and support the bottom of many housing chains and prevent them failing. This means the 3 per cent extra stamp duty on buy-to-let purchases should be removed as well and the removing the mortgage interest tax also recently introduced.
‘At a time when we will now doubtless see greater rental demand from virus-delayed first-time buyers, more rental property will help keep rents down. This would give first-time buyers a chance to save more towards the new larger mortgage deposits required.
‘It’s in the government’s interest to attract buy-to-let investors to help replace demand from first-time buyers in order to protect the housing market as a whole and help keep rents down for the time being too’.
Mark Hayward, chief executive of NAEA Propertymark, also welcomed the changes to stamp duty. ‘This a is a welcome commitment by the Government, and we are glad that they have listened to our calls to help sustain the property market following lockdown.
‘The market is moving well at the moment, however once furlough has ceased and the anticipated recession hits, the market might well need further financial impetus, therefore it is right that the sector is given the support and tools it needs to rebound over the next nine months’.
Jon Cooper, head of distribution at specialist bank, Aldermore said it was encouraging to see the Government being proactive in backing homebuyers at a time when there is an urgent need to support the market. ‘The initial costs of getting on the ladder can be a real barrier to many, so anything that helps reduce that entry fee is welcome for the housing market.
‘The wider economic recovery through job retention after the furlough scheme ends and continued help for businesses will be the real determining factors for how the housing market performs this year. Homeowners and first-time buyers need job security if they are to feel confident in realising their homeowner plans’.
Matthew McDwyer, founder of the London property search website Bricks&Logic, said confirmation of a stamp duty holiday was likely to provide a shot in the arm for the property market. ‘However, while this will possibly stimulate movement at the lower end of the market, it is unlikely to have too significant impact on the wider London market although this appears to be holding up well’.
Jeremy Raj, head of residential property at law firm Irwin Mitchell agreed the London property market might not be affected.
‘There is no doubt that the recent uncertainties and practical difficulties created by lockdown have had a massively detrimental effect, he said.
‘The changes announced to SDLT today went further than most within the industry had dared hope. With an immediate increase in the tax-free band to £500,000 for a fixed period until 31 March 2021, there will be a real boost to the sector. There will also be widespread relief that the implementation has not been delayed until the autumn, which would potentially have stalled the market entirely’.
Eric Leenders, managing director of personal finance at UK Finance, said the stamp duty temporary reduction built on the wide package of support put in place by mortgage lenders, working with the regulator and HM Treasury, to help customers through the corona virus lockdown.
‘The industry has a clear plan to help homeowners whatever their financial situation and is committed to providing ongoing support to those customers who need it’, he said.
Darren Walsh, energy partner at global legal business DWF, said: ‘The Chancellor’s focus on green jobs and a green economic recovery is welcome. The green home initiative seems to be a good place to start and the hope is that local businesses see a real benefit from the uptake of energy efficient home improvements.