Newly appointed Chancellor Rishi Sunak will deliver his first budget on Wednesday 11 March. This will be the first budget since the Conservative Party returned a large majority at the most recent UK election, and as a result several analysts believe the budget will be far more radical than previous versions.
The Conservative Party’s election manifesto was light on detail, but some Government sources have already begun to provide some eye-catching details of what we can expect to hear when the Chancellor steps up to the dispatch box. Here, we’ll take a look at measures that may affect the UK property market.
The Return of the ‘Mansion Tax’?
Earlier this month, the Prime Minister ‘cooled on the idea’ of imposing a ‘mansion tax’ on high earners following a backlash from Tory MPs and grassroots members. However, although the move wouldn’t be popular with Conservative MPs, it would be popular with voters, as a survey found that 73% of voters would be happy to back a mansion tax if the money raised was used to help the NHS. This has led many to speculate that it could be introduced, after all.
If Sunak does implement a money-raising mansion tax on properties valued at more than £1 million, then it could be incredibly good news for people purchasing properties, as it’s thought that some of the money raised will be used to lower Stamp Duty for everyday buyers.
Changes to Stamp Duty
Speaking of Stamp Duty, further changes are expected in the budget after former Chancellor Sajid Javid revealed that he intended to slash rates had he remained in office.
In addition, the Conservative Party manifesto made it clear that a Conservative government would introduce a higher tax charge for overseas buyers, so expect this to be formalised in Sunak’s first statement. It is thought that these buyers could face a 3% stamp duty surcharge, on top of the existing charge for those buying a second home.
This money will likely be used to help combat homelessness, but it could also be used to provide further help to first-time buyers. At present, only first-timers purchasing homes worth £500,000 or less are eligible for the relief, which means that many London-based buyers do not qualify. As a result, Sunak could use some of the money to increase the relief figure (or scrap it entirely).
Plans to Support First-Time Buyers
The Tory manifesto stated that a Conservative government would prioritise first-time buyers with a ‘First Homes’ scheme.
As a result, in the Queen’s Speech the Queen announced that the Government would ‘take steps to support homeownership, including by making homes available at a discount for local first-time buyers’. We have yet to hear substantial about the scheme, however.
With Help to Buy ending in 2023, the First Homes scheme will likely become the Government’s flagship housing policy. The scheme will offer a 30% discount for first-time buyers who are purchasing properties in their local area, with priority given to veterans and key workers, including police officers, nurses and firefighters.
Overall, the scheme could reduce the cost of some new-build homes by as much as £94,000. These savings will also be locked in, meaning that future buyers would also benefit from lower house prices.
However, it remains unclear whether this discount will apply to the private market, housing association properties, or council homes. Plus, the definition of a ‘local’ buyer remains ambiguous at best. With a lack of detail currently raising questions of how the plan will work practically, expect Sunak to make a major announcement as part of his first budget.
If you’re considering investing in the UK property market and you’re unsure what the new budget will mean for you, then please get in touch. At Phillips & Southern, we’re highly experienced in dealing with investment properties and you could benefit from our complete range of expert advisory, management and transactional services. Please get in touch with us on 020 7731 9820 or email [email protected] to learn more.