UK Budget 2021: Real Estate Implications

4 Mar 2021

The Chancellor delivered his much-anticipated second Budget on 3 March 2021, providing some certainty amid the uncertainty shrouding COVID-19. The new Budget includes a number of tax announcements which will provide continued financial support for those in the real estate world, particularly within the residential sector.

“Turning Generation Rent into Generation Buy”

Stamp Duty Land Tax Extension

The Government officially confirmed an extension of the £500,000 stamp duty holiday until 30 June 2021. From 1 July 2021 until 30 September 2021, the Nil Rate Band will reduce to £250,000. The Nil Rate Band will return to its ‘normal’ level of £125,000 on 1 October 2021.

This will allow residential buyers to complete transactions which would have otherwise been frustrated by the 1 April 2021 cut-off, when the SDLT holiday was originally meant to end.

However, removing the SDLT holiday at the end of September 2021 may defer the previous cliff-edge and result in the residential property market flattening for six months prior to the typical resurgence in the Spring months.

Mortgage Guarantee Scheme

The Government has offered to guarantee a new 95% mortgage product aimed at first-time home buyers who can only afford a 5% deposit. A number of the country’s largest lenders have already confirmed that they will offer the product from April 2021.

The new Guaranteed Mortgage Scheme will enable first-time buyers and homeowners to secure a mortgage with a 5 per cent deposit on a property of up to £600,000. As such, the Government will offer lenders the guarantee they require to provide mortgages that cover the remaining 95%.

As the SDLT holiday fades away, this new mortgage scheme will help to sustain activity and enable first-time buyers to reach the first rung on the property ladder.

However, the scheme could further fuel the constant increase in house prices, leaving many in the market susceptible to negative equity in the event of an economic crash.

Article written by: Josh Felberg and Rachel Kass who form part of the Real Estate team at Asserson Law Office.