Estate agents, surveyors, mortgage lenders, conveyancers and 200,000 buyers will be offering the Chancellor a collective thank you. The pressure to complete an absurd number of house sales by 31st March is now off. There was also some good news for first time buyers, at least in the short term. A quick glance at the budget from a property perspective and a brief look forward.
The housing industry was well primed on what to look out for in the Chancellor's speech, with the focus of attention on the stamp duty holiday, capital gains tax and some form of help for the first time buyer. In the end, we got two out of three.
Stamp duty holiday extension
House movers spend some £12 billion a year, equating to 3% of GDP, not including the value of the properties bought and sold. No surprise, then, that the Chancellor is reluctant to turn that off in the face of the biggest economic downturn in 300 years.
Accordingly, the stamp duty holiday due to expire on 31st March was extended to 30th June. 200,000 home movers breathed a sigh of relief, now able to lock in savings of up to £15,000.
What was not anticipated was the tapering of the relief. Instead of a new £500,000 cliff-edge, the nil rate band will be reduced to £250,000 for 3 months from 1st July before reverting to the original level of £125,000 on 1st November.
In the absence of any announcement to the contrary, the 2% non-resident additional rate will be applied from 1st April.
Return of the 95% mortgage
When the pandemic took hold a year ago, the banks - cautious as ever - responded by all but eliminating high loan-to-value mortgages. Those with high equity in their properties went on a buying spree in the race for space, driving up average property prices by over 7% by year end.
Lacking large deposits, first time buyers were left out in the cold.
Last September at the Conservative Party conference the Prime Minister signalled that first time buyers could expect help to get onto the property ladder. On Wednesday, Rishi Sunak outlined the plan.
From 1st April the government will implement a loan guarantee scheme covering up to 95% of the value of a loan. Precise details will follow, but a number of lenders will be participating immediately, with others expected to follow.
Surprisingly, HM Treasury's budget notes do not expressly limit the guarantee to first time buyers. The door seems to be open to all. To good to be true?
With the stamp duty holiday previously due to end on 31st March and high loan-to-value mortgages in very short supply, the market was expected to run out of steam in the second quarter and remain flat for the rest of 2021. Once again, intervention has turned that on it's head.
Last summer's mid-market buying spree was fuelled by the race for space and the stamp duty incentive. At least one of those factors remains in place. We have yet to see what the pandemic effect will be this summer, with much depending on the extent to which confidence is restored by the the vaccination drive.
Early indications are that entry level properties could drive this year's market. Both Rightmove and Zoopla reported a huge surge in visitors almost before the Chancellor sat down. There is now a unique opportunity for first time buyers. Between now and the end of October, there will be a stamp duty holiday. 95% mortgages will be available. Confidence may be boosted by vaccines. Conventional wisdom says - Prices. Will. Go. Up.
But look where conventional wisdom got us a year ago.