Here's how chancellor Rishi Sunak plans to help the housing market
Stamp Duty holiday and green grants for all as chancellor aims to boost the housing market
Chancellor and Yorkshire MP Rishi Sunak lived up to expectations when he announced that he was raising the Stamp Duty threshold on residential property from £125,000, to £500,000 in England and Northern Ireland with immediate effect from today (July 8).
The increase will run until March 31 2021 and means that nine out of 10 homebuyers will pay no Stamp Duty, which costs buyers an average £4,500 per home. The chancellor hopes this will boost sales, prop up house prices and support house builders.
He said property transitions had dropped by 50 per cent and house prices had fallen for the first time in eight years while uncertainty abounded in the market. The reason for the Stamp Duty holiday for those buying a home for £500,000 or under was, he said, to provide a catalyst to boost confidence in the housing market. He added: “I want people feeling confident to buy, sell, move and improve as that will stimulate growth and create jobs.”
The chancellor also announced a Green Homes Grant aimed at making properties more energy efficient and cheaper to run while cutting carbon emissions. The grants will be available from September this year as a voucher. They will fund two thirds of the cost of the work needed up to a maximum of £5,000. Low income households will be entitled to a £10,000 voucher.
He said: “We expect this to make 650,000 homes more energy efficient and this should save households an average of £300 per year in bills.”
Another motivation for introducing the grant scheme is to provide employment and the chancellor believes it will support 140,000 jobs.
Glynis Frew, chief executive of York-based Hunters Property Plc, said: “This is excellent news during a challenging time for the market and if implemented immediately should help to kick-start activity. Without doubt it will help first time buyers in particular - we must look after them, they are vital to the market.”
Tim Hyatt, Head of Residential at Knight Frank, said “Moving house has a clear multiplier effect for the wider economy, different sized businesses in all areas feel the knock-on benefit. The announcement to temporarily cut stamp duty will act as a shot in the arm for UK housing and further bolster a market which has come out of a state of suspension. However, in order for a fully functioning market to return, the availability of higher loan to value mortgages must also be improved to support first time buyers across the country.”
Oliver Knight, Head of Residential Development Research at Knight Frank, added: “The announcement will provide a welcome boost to property transactions across the market and comes at a time when activity levels and interest have already started to recover following the two-month market shut down.
“Clearly, the chancellor recognises the multiplier effect that moving house can have on the UK economy with more money spent on DIY projects and renovations. However, while a temporary holiday will bring forward housing market and economic activity, as well as helping to address affordability concerns surrounding the up-front cost of moving, a wider re-think of property taxes is still needed to reduce the distortive effect Stamp Duty Land Tax has on property markets and maximise any stimulus the government plans to provide to the UK economy.”
However, there were dissenting voices including James Allen, Director of Walker Crips Property Income Ltd, who says: “The Stamp Duty ‘holiday’ is likely to increase transactions in the sub-£500,000 market, adding liquidity and volatility into an already liquid part of the market. Tax take will obviously fall and, at the end of the holiday, transactions are likely to slow significantly again, risking price volatility at a time when the market is craving stability.
“In order to achieve the chancellor’s aim of protecting the housing market, the most obvious route would be to simply reverse the counterproductive changes introduced by Chancellor Osborne. We know what effect they had when introduced, so we can say with high conviction what effects their reversal could hold.”
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