The UK government recently announced a series of temporary schemes and reforms to the housing market in order to kickstart the sector after months of countrywide lockdowns. From encouraging new buyers to invest in homes, improving existing structures and creating new jobs. Chancellor of the Exchequer, Rishi Sunak, announced on the 8th of July several reform schemes as part of the government’s wider coronavirus recovery plan. The schemes include, a stamp duty holiday on houses under £500,000, and a green home grant to allow for homeowners to make their houses more energy efficient.
In England, Stamp Duty is a land tax, payable by those who purchase both property or a piece of land, it is payable when the transaction is completed and based on the sale price. Scotland and Wales have their own systems. Stamp Duty on residential dwellings applies on properties over £125,000, and on land anything over £150,000. However, if you are a first-time buyer you are exempt on properties under £300,000. If a person wants to buy a second home or additional properties they will face an additional 3% surcharge.
The government’s announcement means that those who buy a property under £500,000 will be exempt from stamp duty. If it is an additional home, the buyer will benefit from the stamp duty cut but still have to pay the 3% surcharge. According to The Guardian ‘The starting threshold will be increased to £500,000 on all sales taking place before 31 March 2021. The starting rate above £500,000 will be 5% and will apply to the part of the sale up to £925,000.’
In terms of savings for home buyers, the Stamp Duty holiday is a major incentive, taking thousands off of a buyer’s bill. The Guardian predicted ‘If you are a first-time buyer spending £495,000 on a home, you will not pay any tax now and stand to save £9,750; a mover spending the same sum would save £14,750. At £600,000, you will pay 5% on the portion above £500,000. Your bill will be £5,000 – £15,000 less than under the old rules. An investor spending £250,000 on a property will save £2,500, while one spending £495,000 will save £14,750.’ The stamp duty holiday is a sure way to improve the housing markets prospects as buyers take advantage of savings.
An acceleration in the UK housing market was already taking place as lockdown procedures were lifted, allowing for both buyers to feel more secure in their purchases and carry out the necessary tasks needed to buy a home – such as viewing properties in person – a feat that was only made possible with virtual tours as strict social distancing guidelines were firmly in place. According to Sky News, in June, as lockdown procedures were gradually lifting for businesses across the country, agreed housing sales rose by 15%. According to figures from major property website, Rightmove, in the week after the Chancellor’s stamp duty announcement, in comparison to the same period in 2019, there showed a 35% rise in the number of sales agreed in England.
Sky News reported: ‘The Rightmove data showed asking prices between June 7 and July 11 climbed by 3.7% to hit a record high average of £312,625. That was 2.4% higher than before the lockdown began in March. [Rightmove director Miles Shipside] said: “The busy until interrupted spring market has now picked up where it left off and has been accelerated by both time-limited stamp duty holidays and by home owners reappraising their homes and lifestyles because of the lockdown. These figures are the earliest indicator of house price trends. They show on average prices gently rising not falling, and this will be reflected in the coming months in other house price reports.”’
The governments green recovery only focused on the housing sector. Providing grants that would allow homeowners to retrofit their homes with energy efficient improvements such as insulation, such as solid wall, cavity wall or loft insulation, heating, draught-proofing, double glazing, renewable energy generation, such as solar panels or heat pumps and more according to the government website. The government has invested 3 billion into the scheme and homeowners can claim between £5,000 and £10,000 for improvements depending on income. This scheme would both aid climate change by moving towards carbon neutral homes and also help homeowners save money on bills from energy efficiency. Thousands of local jobs are set to be created with this move, allowing local tradesmen within the construction industry to utilize these job opportunities. The government website predicted: ‘the plan will also create tens of thousands of jobs through bringing forward work on £8.8 billion of new infrastructure, decarbonization and maintenance projects.’