It became obvious fairly early in the pandemic last year that central to the government’s plans for economic recovery was the protection and stimulus of the property market.
By doing that, it was presumed, it would protect wealth and allow people to move home freely throughout the country in unprecedented times that saw demand soar thanks to a myriad of factors.
Tax incentives and government schemes were enacted or strengthened to encourage people to buy their own homes or make a move that was already planned but perhaps delayed due to national restrictions.
With the country now emerging from the pandemic and starting to open up, and the government set to announce detailed plans about re-opening in the next few weeks, it’s a good time to take stock and see if these measures have worked, or what impact they’ve had.
Regardless of this, 2020 was a huge year for landlords and property investors alike with rising prices, demand and yields. A market that was struggling to meet demand with its supply was barely scratched by a global pandemic and recession which by all accounts is pretty impressive.
Let’s take a look through the measures that the government introduced for home buyers first and foremost to be able to consider their impact.
Back in July the chancellor, Rishi Sunak, announced that he was suspending Stamp Duty taxes on the first £500,000 on all houses in England and Northern Ireland. Initially this was set to end by October 2020, but he announced the scheme would be extended to the 31st of March of this year.
Stamp Duty, in short, is a tax paid by people buying property and varies according to location and the price of the property. By suspending the tax temporarily Sunak has saved many buyers thousands in taxes through 2020 and into the spring of this year.
Secondly this government re-launched the Help to Buy scheme, but this wasn’t too much different to the version that preceded it. According to The Guardian, ‘The new version offers similar terms – a loan of between 5% and 20% (40% in London) from the government to put towards a new-build house or flat – but, crucially, only first-time buyers can use it.
Will these government schemes see an uplift in people buying homes?
As written by Ross Clark in The Spectator, “My guess is that the constant ratcheting up of the interest rate is designed deliberately to irritate the homebuyer. It is a scheme devised with the intention that beneficiaries start to think about moving on after five years or so, at which point they would repay their equity loan. Moving up the housing ladder won’t be easy.”
In terms of the stamp duty holiday, whilst it does stimulate the market in the short term and does help some home buyers, the big concern now is that those caught in chains or under local restrictions as we make our way out of the pandemic will suffer by missing the deadline and be forced to pay thousands more or simply pull out of the sale.
The BBC give an example of a young couple Greg and David who are experiencing delays with their home build due to unforeseen circumstances, which now means that their home won’t be completed in time for them to benefit from the old Help to Buy scheme, without which they won’t be able to afford to complete.
There are thousands of examples of people who will have to pull out of sales if they miss the March deadline for the stamp duty holiday.
This all leaves an increasingly likely situation where people who had expected to buy homes either last year or this year will need to re-enter the Private Rented Sector (PRS). A sector that throughout the past few years has been booming regardless, is now potentially going to see thousands more enter thanks to circumstances outside their control.
We won’t be able to see the full picture until the summer, but it seems probably that this scenario will come to pass and, conversely, will mean rental growth increasing along with demand and yields for landlords.