LATEST: Industry reaction to Sunak’s ‘double bubble’ 2021 budget

Rishi Sunak reveals expected Stamp Duty holiday extension and first time buyer mortgage leg-up, but corporation tax is to rise in 2023.

rishi sunak stamp duty budget

Rishi Sunak’s budget announcement yesterday delivered on two rumoured stimulation policies for the housing markets, an extension to his zero-rate Stamp Duty holiday and the launch of a new Help-to-Buy style mortgage deposit scheme for first time buyers.

Many estate agents will be relieved that the Stamp Duty holiday for homes under £500,000 in England and Northern Ireland has been extended to the end of June, as expected, and applied to sales of up to £250,000 until end of September.

The pre-Covid stamp duty rates will therefore be reintroduced on October 1st 2021.

Sunak has also announced in his budget that the proposed mortgage guarantee scheme for those able to save up a 5% deposit, which is almost identical to the previous Help to Buy mortgage equity scheme, will start on April 1st.

The furlough scheme is also to be extended, as leaked inadvertently yesterday by minister Kwasi Kwarteng. The scheme will finish at the end of September but agencies who still have furloughed staff will have to pay 10% of the cost in July and 20% of the cost from August onwards.

To offset this, the Bounce Back and CBILS loans schemes are to be replaced with a single ‘recovery loan’ that will run until December 31st and offer loans of between £25,000 and £10 million, as well as new ‘recovery grants’.

But the Chancellor’s had some bad news in the budget for estate agency owners and those operating millions of other UK businesses.  Corporation tax is to rise from 18% to a whopping 25% from 2023 onwards, although smaller businesses with profits of less than £50,000 a year will see no rise. Between £50,000 and £250,000 the rate will be tapered up from 19% to 25%.

Budget business

The 100% business rates discount is to continue until the end of June, but then drop to a 60% discount for the rest of the year.

ryan jones cluttons“The current business rates holiday has provided companies, many of whom have been forced to close or suffered a significant impact on their income, with the means to fight for their survival,” says Ryan Jones, Business Rates Partner at Cluttons (pictured).

“But landlords who have empty properties or who have lost tenants during the pandemic have not received the same level of financial support from the government. What support can business owners and landlords expect from the government once the current business rates holiday ends?”.

In return, Sunak’s budget is to give companies much more generous tax breaks for those who are shouldering losses of up to £2 million, and also a new and hugely generous allowance for companies who invest – which will soon be able to claim 130% of the investment cost against tax.

But Sunak revealed the brutal figures his budget underpins – the total government exposure to Covid totals £407 billion so far, with borrowing at £350 billion.

Industry reaction

Kate Eales imageKate Eales, Head of Regional Residential Agency at Strutt & Parker

“In addition to reassuring those already down the line, an extension is likely to motivate potential buyers who thought about entering the market but might have been put off by lockdown restrictions and felt they had already missed the boat with this holiday all together,” she says.

“An extension, combined with the recent Government roadmap to normality, is likely to work together to encourage more to come to the market and take advantage of the holiday.”

Mark Hayward, Chief Policy Adviser, Propertymark

“The extension of the Stamp Duty holiday to the end of June followed by the transition to the end of September is much needed to help prevent sales falling through as the initial deadline approaches. We urge the Governments in Scotland and Wales to follow the UK Government’s lead on this,” he says.

“We know from our own research that failed sales cost estate agents more than £4000 per sale and consumers more than £1500 which is why we have called on Government to rethink the Stamp Duty holiday timings. This is good news for the market and will help maintain consumer confidence who are seeking to buy and sell in the coming months.”

Ben Taylor, CEO of Keller Williams UK

“Today’s Stamp Duty holiday extension in the budget will be very warmly welcomed by homebuyers waiting to complete and currently stuck in the transaction pipeline due to market delays,” he says.

The original stamp duty holiday is on track to save homebuyers an estimated £1.5bn and with the extension in place, this benefit should increase to £2bn with 360,000 transactions likely to benefit until the new June deadline.”

Link to Stamp Duty featureIain McKenzie, CEO of The Guild of Property Professionals

“The Chancellor gave the property market a double shot in the arm today, with a boost from the Stamp Duty holiday extension and 95% mortgages. Extending the stamp duty holiday until the end of June, then phasing it out until September should help avoid a sudden downturn in prices caused by the much-feared cliff-edge end.”

Link to Stamp Duty newsGuy Gittins, CEO of Chestertons

“Any additional assistance for first-time buyers is always welcome. First-time buyers were hit particularly hard by the lack of mortgage availability during the pandemic. As such, the government’s introduction of a 95% LTV mortgage presents good news for first-time buyers, keen to get on the property ladder,” he says.

Another audience likely to benefit are existing home owners wanting to trade up or re-mortgage to release equity.”

Camilla Dell, Managing Partner at Black Brick

“Buyers no longer face a ‘cliff edge’ to try and get their transactions through before 31st March. However, for prime Central London, where property values are much higher than the rest of the UK, the saving equates to £15,000 so not a significant game changer,” she says.

“What’s more relevant for PCL is the surcharge coming in on April 1st for overseas buyers and for many buyers, the SDLT saving has been eradicated by the rise in house prices.”

budgetDavid Westgate, group chief executive, Andrews Property Group

“As expected, the Stamp Duty holiday has been extended, but the Government has missed a gilt-edged opportunity to put in place measures to avoid another cliff-edge scenario in three month’s time,” he says.

“Reducing the nil band rate from £500k to £250k, while a better solution than simply cutting off the tax break on 30th June, could still result in a stampede of buyers rushing to complete before the deadline. A better solution, surely, would have been to allow transactions, where a mortgage offer has been granted before the deadline, to complete at their own pace.”

budgetKevin Shaw, Group MD of Leaders Romans Group

“At the moment, the property market is set to be stronger than initial forecasts have suggested and we expect Q2 to perform well. The Stamp Duty Holiday extension will certainly help with this, enabling buyers who didn’t get through in time to still take advantage of the reduction in Duty,” he says.

While there is still the opportunity for buyers to move and take advantage of the reduction, it’s also important that anyone looking to sell starts the process now to have any hope of completing before the new deadline. ”

budgetNicky Stevenson, MD of Fine & Country

“The loss of a £15,000 tax break would not have proved a deal-breaker for wealthier buyers in and of itself. However, they would have come under pressure to drop their price from further down the chain,” she says.

“For first-time buyers, who are integral to a well functioning housing market market, a few thousand pounds can make all the difference when stretching for a deposit. That’s why, in reality, those who benefited least from the tax break would have been the most likely to need to renegotiate. The larger the chain, the more likely this pressure and disruption would have caused it to break down as each participant tried to pass the cost on.”

david-greene loaw socDavid Greene, President of the Law Society

“We are pleased the government has taken action to avoid the Stamp Duty holiday cliff edge by implementing one of the solutions that we and our members put forward to the problem that ending the scheme on 31 March could cause significant disruption to both consumers and the market.”

Dr Tom Quirk, MD of Searchflow

tom quirke searchflow“The pressures that the industry has been facing in processing the increased transaction volumes has been tough for the industry to scale up to. It is likely that more buyers will want to take advantage of the tax savings on offer and so we envisage the exceptional levels are likely to continue for some time ,” he says.

“Data from a Property Trends Report published by Landmark Information Group paints a very clear picture on what these peaks have looked like since the SDLT holiday was first announced, with property search order volumes up by almost 60% in December 2020, compared to 2019. The industry therefore has to continue digging deep, innovating and adapting, where possible, to meet the deadline.”

Detail junky? Read the full Budget document.

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