Agents worrying what happens to the housing market and economy when the nation emerges from the shadow of Covid will have been reassured and alarmed in equal measure by Chancellor Rishi Sunak’s speech yesterday.
Billed as his 2020 spending review and financial forecast it revealed the perilous position the UK finds itself in, but also set out Sunak’s spending plans, including £7.1 billion extra for house building.
The figures are unsettling, nevertheless. The economy is to contract by 11.3% this year, the greatest reduction du ring peacetime for 300 years, recovering by 5.5% next year and 6.6% in 2022. And the economy will not return to ‘normal’ until the final months of 2022, he said.
The government is also borrowing eye-watering sums including an estimated £394 billion this year, or 19% of GDP, followed by £164 billion next year. During 2019 it borrowed £44 billion.
97% of GDP
Although Sunak revealed that debt will reach 97% of GDP next year, he said “the cost of inaction would have been much higher” and that unemployment in the UK remains lower than many other large EU countries, peaking at 7.5% next year.
The Chancellor is hoping to spend his way out of the recession, including a £7.1 billion national home building fund on top of its existing £12 billion affordable homes programme.
“Today I’ve announced a huge investment in jobs, public services and infrastructure but these figures can ring hollow – the true measure of our success is that everyone in this country has the opportunity to reach their potential,” he said.
But what about stamp duty, Rishi?
Neil Cobbold, CEO of Payprop: “Understandably, today’s Spending Review focused on funding for public services in light of the ongoing COVID-19 pandemic, even if the property industry had hoped that the Chancellor would use the address to provide clarity on issues such as the stamp duty holiday and proposed changes to Capital Gains Tax (CGT).
“A longer period for property buyers to benefit from significant tax savings would provide the market with a welcome boost as we approach the New Year and the effects of record-breaking sales volume this summer start to wear off.”
Rob Houghton, CEO of Really moving: “Thousands of homebuyers up and down the country are facing the prospect of missing out on the stamp duty holiday if their purchase doesn’t complete by 31st March.
The housing market has been absolutely critical in keeping the economy moving over the last few months and there’s no doubt further challenges lie ahead, with unemployment rising and economic growth in decline.
“When someone moves house it’s not just the estate agent who gets paid – it’s also the solicitor, the financial advisor, the surveyor, the removals firm and often the cleaner, the electrician, the furniture shop and so on. There’s very little else that promotes spending in such a far-reaching way.”