Stamp duty hikes for overseas buyers and investment in new homes in high-demand areas were among the main housing pledges announced in today’s Budget.
Chancellor Rishi Sunak also announced what he described as the largest investment in affordable housing in a decade and further funding to remove unsafe cladding from flats in the wake of the Grenfell tragedy.
Here, we outline the Chancellor’s key housing policies from a Budget speech that was dominated by the government’s response to the coronavirus outbreak.
Stamp duty surcharge for overseas buyers
Overseas-based buyers of residential property in England and Northern Ireland will be forced to pay a 2% stamp duty surcharge from April 2021.
If the overseas buyer is not intending to move to the UK and live in the property themselves, they’ll have to pay an extra 3% on top of that, meaning a hefty 5% more than the standard rates.
This move was originally raised in the Conservative election manifesto, when it was suggested that a surcharge on foreign buyers could raise an additional £120m a year.
The government says money raised from this surcharge will help fund policies to reduce rough sleeping.
Homes in high-demand areas
The Chancellor announced that £1.1bn of funding will be allocated from the Housing Infrastructure Fund to build up to 69,620 new homes in areas of ‘high demand’.
These areas will include Manchester, south Sunderland and south Lancaster. A further £328m will be invested in housing projects in York, Harlow and north Warwickshire.
Affordable homes funding
Mr Sunak pledged ‘the largest cash investment in affordable housing in a decade’, with £12.2bn set to be put towards a new ‘multi-year affordable homes programme’.
The government will cut interest rates on lending for social housing by 1% and offer £1.15bn worth of discounted loans for local infrastructure projects, in an attempt to help councils build more homes.
Building safety fund
Mr Sunak says that the government will spend an extra £1bn from the Building Safety Fund to remove unsafe cladding from residential buildings more than 18 metres high.
No new mansion tax or inheritance tax changes
Despite much debate in the run-up to the Budget, the prospect of a so-called ‘mansion tax’ on high-value properties didn’t come to fruition.
Likewise, the changes to the inheritance tax system proposed by a cross-party group of MPs were nowhere to be seen.
Key housing announcements before the Budget
Two of the most significant reforms affecting property came in advance of the Budget – a cut to the Bank of England base rate and discounts of up to a third on new-build homes for first-time buyers.
Base rate cut by 0.5%
This morning, the Bank of England announced a reduction of the base rate from 0.75% to 0.25%, as it seeks to ‘bolster the cash flows of businesses and households’ amid the ongoing coronavirus outbreak.
Base rate reductions theoretically mean cheaper mortgages, but the Bank says it accepts some banks and building societies may struggle to reduce headline rates any further.
It says it will make additional funding available to banks and building societies that increase lending, with small and medium-sized lenders given priority.
This morning, Co-operative Bank and Barclays became the first major lenders to announce they’ll cut their standard variable rates by the full 0.5%.
£100,000 discounts on new-build houses
The government announced in February that first-time buyers could benefit from discounts of around £100,000 under the new First Homes scheme.
The government says First Homes will cut the cost of some new-build properties by a third.
The scheme, originally proposed in the Conservative manifesto, would allow first-time buyers to purchase a property with a 30% discount on market value.
