Covid-19 has made many people’s lives miserable, shutting down a lot of businesses. The bank of England predicted that house prices may fall 16% because of the economic upheaval caused by the coronavirus. To this, the UK government has reacted swiftly by introducing stamp duty holiday, the furlough scheme, the CBILS, etc. Instead of falling, the UK housing market has moved in the other direction: It has been blooming for the entire second half of 2020. With the new budget that has been announced in early March, which seems to favour the UK residents and increase the government’s tax income, what effect does it have on overseas’ investors?
Extension of stamp duty holiday
The stamp duty holiday has been extended from the end of March to the end of June, and then another 3 months for properties up to £250,000. This allows more first-time buyers to be able to get on the property ladder. For us investors, even though we won’t be benefiting much from the stamp duty holiday, this measure does give us a good indication as to which direction the market would move in the next 6 months.
Furlough Scheme extension
First of all, what does the furlough scheme say? In the budget, it outlines that furloughed employees will continue to receive up to 80% of their pay for hours not worked. Starting from July, the government will contribute 70% of the pay, whereas the employers will have to pay 10% for hours not worked. In August and September, the government will pay 60% and employers will need to pay 20% for hours not worked. The government has been making every effort to prevent the rise of unemployment, which has already reached 5.1%. This has definitely calmed the general public, especially those who are on the furlough scheme which was planned to end by the end of March.
Even though it seems like many people are not getting the full salary they would normally receive, however, people are able to save more money since they were not able to go out and spend it. The extension of the furlough scheme, together with the 95% mortgage which will be available starting in April, give many people the motivation to consider buying their first property, once again pushes up the housing market.
The UK budget 2021 is very cleverly planned. These two measures alone have almost guaranteed an upward movement of the housing market and increased the motivation for first-time buyers to purchase their own property. With the relatively obvious motive from the government, it is almost certain that house prices will continue to rise, just like what we have seen happening in the year 2020 until now.
If can force what is going to happen, you can make better planning for the future. In an upward moving market, there will be people looking to sell their properties, hoping to make a profit while the market is still hurting up. However, since it is not advised to move house during the Covid time, the supply will not outgrow the demand of properties, making this year potentially a good year for flipping in the short-term and holding the property for the long-term.