The Budget at a glance
- Funding for apprenticeships
- Extension of Stamp Duty Holiday
- Guaranteed 95% mortgages
- Funding for an MMC taskforce
Historically, the only person legally allowed to drink alcohol in the House of Commons is the Chancellor while delivering his Budget speech. While this won’t apply to teetotaller Rishi Sunak, there will probably be many housebuilders raising a glass to him this evening.
Today Sunak emerged from Number 11 brandishing a red box that some speculated could end his career. The Chancellor had the unenviable task of putting a positive spin on five years of tax pain to pay for the £407bn that Covid has cost the economy.
However, Sunak managed to generate some crowd-pleasing headlines, promising to do “whatever it takes” to steer the economy out of the biggest economic slump in 300 years. This includes unparalleled support for the housebuilding industry, which the government clearly regards as a key player in the country’s economic recovery.
Welcome news
Redrow’s CEO Matthew Pratt, said: “Overall today’s Budget gives hope for the UK’s recovery, and we welcome the boost in funding for apprenticeships, which will help encourage a vital stream of talent into the construction industry. The stamp duty holiday extension will be welcome news to those buyers caught up in the home buying process and who may have otherwise missed out on a saving, and the element of tapering between June and September will also be welcome to a number of new market entrants.”
Greg Hill, Deputy Chief Executive, Hill Group, added: “The Chancellor’s Budget clearly demonstrates the government’s commitment to helping people onto the property market and into their own home. The stamp duty extension will not only help buyers currently caught in the completion trap, but also give a window of opportunity to additional buyers looking to move.
“The launch of the government-backed 95% LTV mortgage scheme significantly reinforces this commitment by opening up the market to hundreds of thousands more buyers, offering an essential route to home ownership at a critical point in this country’s recovery from the pandemic.”
The extension of the Stamp Duty holiday has been particularly welcome. Frank Pennal, CEO of Close Brothers Property Finance Division, said: “Extending the stamp duty holiday is a very sensible move – ensuring the estimated 193,198 sales currently in the pipeline are not lost when lockdown is fully lifted will mean ‘normal’ market conditions can resume. The property industry has been an engine for economic growth during the pandemic and this decision will enable that momentum to continue.”
Calls to scrap Stamp Duty
However, experts argue that you can have too much of a good thing. While the Stamp Duty Holiday has drummed up demand, the property industry has struggled to keep up.
Mark Peck, Director, Cheffins said: “Whilst the extension to the stamp duty holiday will be welcomed for those with property sales already agreed, the government here is simply kicking the can down the road with chaos set to ensue once the tax break comes is reduced in June and tapered until September. The pressure on the property industry since the announcement of the stamp duty holiday has been immeasurable and this extension will simply continue to add to the strain already being felt by both buyers and sellers as they look to complete on sales before the end of the tax break.
“Whilst the Chancellor has attempted to manage this with the tapering system until September, the property industry will need to brace itself for further pandemonium throughout the summer months.
Whilst the stamp duty holiday certainly allowed the property market to continue with full force throughout the coronavirus pandemic and ensure that property sales continued at a fast pace, it has created an unhealthy scenario with values increasing at unsustainable levels within a short space of time.”
Others argue that kicking the can down the road makes little sense, and the tax should simply be binned. Despite being a golden goose for the government, scrapping the tax and unleashing the full potential of the property market would create enough prosperity to compensate in wider spending.
Sarwjit Sambhi, CEO of St. Modwen Properties, said: “This extension should go some way in alleviating the anxiety the cliff edge has caused for homebuyers across the country, and we welcome the phased reduction to October to avoid another administrative bottleneck come June.
“The high levels of demand the property market is currently experiencing shows the impact this tax can have on both first-time buyers’ and homeowners’ ability to move, which begs the question as to whether evolving or potentially scrapping stamp duty should be next on the agenda.
“We’ll wait to see how the new mortgage guarantee scheme performs in helping first timers get their foot on the property ladder but any stimulus is welcome. If it helps people buy their first home then hopefully it is enough to keep the market moving once both the stamp duty holiday and the furlough scheme come to an end later this year.”
Phil Bayliss, CEO of later living at Legal & General, added: “As Britain emerges from the pandemic over the coming months, extending the Stamp Duty holiday will help sustain a strong property market amid the worst economic downturn in 300 years.
“Importantly, the extension ensures a more efficient use of Britain’s existing housing stock can continue, by incentivising older homeowners living in larger properties to downsize. These homes can be put to much better use by first-time buyers and growing families but, at present, nearly nine million bedrooms in the homes of older people are lying empty.
“Ultimately, we hope that the holiday might one day inspire the scrapping of the levy altogether. Not only would this inject much-needed liquidity into the market, it would also help first-time buyers, second-steppers and young families climb up the property ladder.”
Can supply keep up with demand?
While the industry is grateful for the acknowledgement of the contribution it makes to the economy, many see the measures as a sticking plaster solution to a bullet wound.
Stephen Wicks, Inland Homes CEO, said: “Both the stamp duty holiday extension and support for 95% mortgages are very welcome short-term measures.
“However, the UK continues to suffer from a chronic undersupply of housing and the unintended consequences of the measures announced today may fuel an artificial buoyancy in the housing market that is not sustainable. To really speed up the delivery of new housing, we need longer-term planning reform. The government needs to act quickly and invest to speed up the whole process to give us the platform to address the housing crisis.”
Others have pointed out that there is no use stoking supply if demand cannot be met. Brendan Sharkey, Head of Construction and Real Estate at MHA MacIntyre Hudson, said:
“It is rare to listen to such an encouraging budget and confidence will have increased markedly across the construction sector after hearing the Chancellor speak. The extension of Stamp Duty relief makes perfect sense given the backlog of housing purchases. The tapering of relief through to April 2022 takes the angst out of deadlines while stimulating the number of transactions and new builds, which is all good news for the economy.
“In fact, when this is combined with the Chancellor’s new government mortgage guarantee scheme we could see an unprecedented rush to buy. So, the only question is whether the developers can meet the demand as it takes time to bring stock to the market.”
Dean Clifford, co-founder, Great Marlborough Estates, added: “Homeownership remains the aspiration for the vast majority and it is right that the government’s housing policy looks to support that. These government-backed mortgages will help first-time buyers get onto the housing ladder and drive activity as the stamp duty holiday and Help to Buy are wound down.
“Yet encouraging banks to lend to first-time buyers can only ever be part of the solution. Too much demand-side stimulus without increasing supply risks stoking an unsustainable housing bubble.
“The bigger picture involves increasing housing delivery across the board which can only be achieved by having a better resourced and designed planning system.”
Support for MMC
To help drive up supply, the Ministry of Housing, Communities and Local Government (MHCLG) will establish an MMC Taskforce, backed by £10 million of seed funding, to accelerate the delivery of MMC homes in the UK.
The Taskforce will consist of world-leading experts from across government and industry to fast-track the adoption of modern methods of construction. The Taskforce will work closely with local authorities and Mayoral Combined Authorities, including the West Midlands Combined Authority and the Liverpool City Region who have already brought forwards ambitious proposals.
Jordan Rosenhaus, chief executive at modular housebuilder TopHat, said: “It’s great to see the Government continuing to champion modern methods of construction in today’s Budget with the creation of an ‘MMC taskforce’, which will be backed by £10m of seed funding.
“If, as an economy, we’re going to reach our 2050 net-zero targets while simultaneously ramping up housing delivery, it’s going to be vital that the housebuilding sector is encouraged to diversify supply. By manufacturing offsite, we’re able to achieve carbon savings by producing better-performing homes that consume less energy, leak less heat and are made from more environmentally friendly materials.
“Our product’s sustainability credentials also translate into huge cost savings for consumers, who, because of our homes’ better energy performance, save hundreds on their heating bills every year. These cost savings are vital, and should be better communicated to consumers, as there is an urgent need to ween consumers off decades-old, polluting technology – such as gas boilers – and onto more low-carbon technologies – such as solar panels and air source heat pumps.
“Unless more homes are built in factories, we won’t meet net-zero or new housebuilding targets.”
One year on from handing the NHS a blank cheque to fight the oncoming pandemic, Rishi Sunak has hinted at a recovery, even though it may be a bitter pill to swallow.
PICTURE CREDIT: HM Treasury via Flickr
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