Our pre-Spring Budget recommendations
With the Spring Budget approaching on 6th March 2024, we’ve outlined three areas of reform that we’d like to see the government introduce to help support the industry.
1. An increase in stamp duty thresholds in line with regional property prices
We suggest a more localised approach to stamp duty charges in line with regional property prices. Our data suggests a disproportionate effect of stamp duty relief in some regions of England compared to others. Currently, every area has the same zero tax charge for homes up to £250,000 for all movers and £425,000 for first time buyers.
- In London, only 4% of homes are stamp duty exempt for all buyers, compared to 71% in the North East
- Less than a third (28%) of London properties are exempt from stamp duty for first time buyers, compared to nine in ten (91%) in the North East.
- See table below for a full breakdown of regional differences
We’re suggesting a more localised approach to stamp duty charges in line with regional property prices to help support more first-time buyers in getting a foot on the ladder. This will also potentially encourage more movement up and down the ladder.
Rightmove’s property expert Tim Bannister said:
“Stamp duty is a big barrier to moving, with some who would potentially consider a move likely put off by the hefty stamp duty tax in addition to other moving costs. At the very least the government should be thinking about making the current changes to first-time buyer stamp duty charges permanent, with the higher thresholds introduced in 2022 due to expire next year. However, we think there is an opportunity to go a step further. With such regional variations in property prices, increasing stamp duty thresholds in line with these regional variations would seem a logical first step for stamp duty reform. Whilst longer-term supply measures are also needed, this could be one way to help first-time buyers trying to get onto the ladder in more expensive parts of England.”
2. Rumoured 99% mortgages aren’t enough – more innovation is required to help first-time buyers
One rumoured change ahead of the Spring Budget is a 99% mortgage scheme. We welcome innovation with open arms, however new schemes will need to go further and support a larger group of future first-time buyers than a 99% mortgage scheme is likely to.
A 99% mortgage only requires a 1% deposit, yet accessibility remains limited. It addresses the issue of small deposits, faced by many first-time buyers, but not the stringent lender affordability criteria. Leaving many first-time buyers still unable to get on the ladder.
Data from the FCA and Bank of England highlights that only 5% of mortgages currently taken out are at 95% or above, suggesting that many prefer to save a larger deposit and benefit from a lower mortgage rate instead.
Rightmove’s Mortgage expert Matt Smith said:
“It’s been good to see innovation in the mortgage product space over the last couple of years, both from traditional lenders and more recently from new entrants. These new products have the good intention of helping renters who want to buy through supporting those with smaller deposits, or enhancing the amount a first-time buyer can borrow through access to longer term fixed rates – removing the stress test.
“Each of these new innovations are working to ensure that lenders balance the need to be prudent and comply with complex regulation that govern their affordability criteria, whilst also increasing access to homeownership to more people.
“The proposal for a 99% mortgage product will offer further support for those with smaller deposits, but it doesn’t address the issue of being able to pass an affordability stress test at 8%+ whilst also being inside the 4.5 loan to income ratio.
“Whilst we support new solutions to help more first-time buyers, the 99% LTV mortgage alone is only likely to support a relatively small group. More needs to be done to strike the right balance between supporting a bigger group of future first-time buyers, whilst maintaining robust affordability assessments.”
3. More incentives needed to help landlords make green home improvements
To encourage more landlords to make ‘green’ improvements and not to sell their properties, bigger and more widely accessible grants or tax savings should be considered to make rental homes greener for tenants.
The government has backtracked on some energy efficiency targets recently. In particular, a lack of clarity around future Energy Performance Certificate regulations which has lead to a decline in landlords’ intentions to make energy efficiency upgrades. The lack of support for landlords is to the detriment of tenants who we know increasingly desire energy efficiency.
In 2022, 36% of landlords said they planned to make improvements to properties rated below C. In late 2023, this dropped to 26%.
Rightmove’s lettings expert Christian Balshen said:
“Due to the lack of available and accessible funding, many landlords aren’t in a financial position to be able to carry out major energy efficiency upgrades to their properties. A further lack of clarity around potential future Energy Performance Certificate regulations means we’ve seen a drop in the number of landlords who are actively deciding to make their properties greener. Ultimately this will be to the detriment of tenants who are increasingly wanting to live in energy efficient properties, and so we’d encourage any financial incentives that can be provided to landlords to improve the energy efficiency of the UK private rented sector.”
We’ll be sharing further commentary to the Budget following its announcement.
Stay in the loop with our webinars…
News Hour: Spring Budget Special
Tuesday 12th March 10:00 – 11:00 AM
Join us to learn:
- About the government’s latest fiscal policies
- How these will stimulate the property market and affect you and your business
Property Taxes: Post Budget Implications and Tax Year End Planning
Wednesday 20th March, 10:00-11:00AM
Join us to learn:
- How the Spring Budget tax changes will affect individuals and property businesses
- Tax Year End planning ideas that you and your clients can implement now
- How to reduce your tax liability and become more tax efficient
