It was perhaps the property market’s worst-kept secret but the Chancellor’s Emergency Budget granted many home buyers in England and Northern Ireland a nine-month stamp duty holiday.
Rishi Sunak faced no easy task in the current climate. A disgruntled public is becoming increasingly cynical about those who lead us and there are real fears in many sectors about the nation’s survivability should the COVID-19 crisis continue indefinitely.
Balancing financial prudence against the almost desperate need for good news was always going to be a difficult tightrope to walk and only time will tell if it’s been enough to galvanise various sectors of the economy into a fresh burst of life.
Demand for change
But the decision on stamp duty was slightly different in that demand for change pre-dated the coronavirus crisis by some margin and therefore, when it finally happened, it was bound to be roundly applauded. Indeed, there will no doubt be many estate agents who will already be hoping the nine-month time limit is extended beyond next spring.
In simple terms, stamp duty will only now be payable on homes worth £500,000 or more. The benchmark figure until this morning was much lower at £125,000 so quite a few buyers are going to be better off.
Just how much depends on the value of the property they buy but the stamp duty on a house valued at the UK average of £248,000 has been netting the Treasury £2,460. That money will now remain in the pockets of buyers, which the Chancellor hopes will help inspire a few more property sales – or perhaps a little more largesse on the high street or down at the pub.
A good day
Indeed, there’s even a benefit for those with the spending power to exceed the £500,000 mark as they will also pay a lower percentage. Combined with £2bn funding package for a home improvement incentive, and you’d think the property sector has had a good day.
But …. (and, sadly, there is one)…..
If the Chancellor’s moves are to mean anything, it may mean persuading the banks and building societies to ease their stranglehold on lending.
The biggest obstacle to buying a home is not easing off stamp duty – at least not that alone. It should help; it ought to help. But if buyers are still expected to find a huge deposit before they can even consider a one-bedroom flat, there may not be a great deal of movement.
For that, buyers are going to need to increase their spending power by tens of thousands of pounds and, with wages even more unlikely to sky-rocket in the wake of the pandemic, more generous mortgage rates may be necessary.
After years of touting austerity, it may seem hypocritical for the government to try tickling more generous lending terms out of the nation’s financial institutions – especially when it was such profligate behaviour which led to the 2007 crash in the first place.
But it may be the only answer if Mr Sunak’s announcements today are to match their full potential.