More change has happened to the housing market over the last few months than the last three years. The actions taken by government in recent months represent some of the biggest change we’ve seen in a very long time – a stamp duty holiday, planning regulation changes, and now even the potential for leasehold to become commonhold further down the line.
So, what do all these changes mean and how could they affect you? Here’s three things you need to know.
1. Main homes up to £500k are now exempt from stamp duty until March 2021
The Chancellor’s summer economic update was eagerly anticipated, with many expecting major reforms to revive the economy as we gradually ease out of lockdown. Dramatically raising the threshold at which stamp duty is paid, until March 2021, was one of these big ticket items introduced and has been broadly welcomed.
The housing market is the leader of economic activity and health. A properly functioning busy housing market is expected to support prosperity, stability, and wealth creation.
Extending the threshold to £500k for main homes will enable many households, previously put off moving due to the cost of stamp duty, to upsize or downsize as their needs require, or even to take a first step onto the ladder. Buyers stand to make a significant tax saving, and this is helping to generate a wave of activity during the market’s most crucial summer months. It is a huge change, and perhaps might herald a deeper review of stamp duty, viewed by many as a regressive tax which penalises mobility.
Although some critics are saying that this temporary stamp duty reform comes at the ‘expense of tomorrow’, and will lead to a surge in completions next March (similar to what happened before the 3% stamp duty surcharge came into effect in 2016), this is missing the point. The housing market was facing a steep decline in activity if the Chancellor had not intervened. Lead indicators were pointing to a house price slump. In a deflationary environment, both buyers and sellers tend to sit on their hands. This would have been the last thing the economy needed so I think it was right for the Government to intervene.
2. From September, you can build two storey extensions with a fast-tracked application process
On 21st July 2020, new planning regulation laws were introduced in parliament. First, to create more space in existing residential properties and second, to repurpose unused commercial stock for residential use.
From September, full planning applications will not be required to demolish and rebuild unused buildings as homes. Homeowners can also build an additional two floors to create more living space. This can all be done on a fast track approval process called ‘permitted development’, which allows certain changes to be made in the home without the need to obtain planning permission. While there are restrictions on the type of properties that can apply to the scheme, and it will benefit mostly detached homes, it is hoped to reduce pressure on greenfield sites and deliver more homes and space quickly.
This means that whether you are looking to sell your home, or perhaps ‘improve not move’, your home could now in effect has double the potential. So either way, it’s a win-win situation. For those looking to build an extension, refinancing may well be something they will need to consider, and today’s low rate environment means that there has never been a better time to finance home improvements.
3. Leasehold may be replaced with commonhold, but not for some time
We could see changes on the horizon for leasehold properties. Only last week, the Law Commission published an 850-page report with recommendations which would allow homeowners to buy the freehold of their property or extend their lease and take control of the management of flats.
Leasehold has long been a contentious and sensitive issue – with flats often facing high or increasing service charges and management fees and the prospect of considerable expense if there is the need to renew a lease which is getting to a relatively short remaining term. Many new build property developments are also now being sold as leasehold.
With over 4.3m leasehold homes in England, the suggestions have been put forward as a starting point to try and clear the problems with the system, which some argue is archaic and unjust.
However, although the government has said they will begin to look into these suggestions and admit that the system is flawed, any legislation on this is unlikely to come forward swiftly – and whether it will benefit everyone in a leasehold property (as some flat developments will need to rely on a management company for upkeep) remains to be seen.
So, while an interesting development over the last week or two, it’s very much a ‘watch this space’ issue.
What does this all mean for me?
Ultimately, if you are looking to buy, sell or improve a property, and can afford to do so, the conditions have never been better.
There’s no doubt that there is a governmental determination to get the housing market moving again. And whether you were thinking about buying pre-pandemic, wanting to upgrade your home, or are only just considering moving, the next six months or so are going to be a prime time to do so. We probably won’t see stimulus measures like this again for quite some time. So, if you are minded to do something, it may be worth acting now.
If you have any thoughts you’d like to share then please feel free to email me at vicki.blog@kensingtonmortgages.co.uk
Vicki Harris has 20 years of experience working in challenger financial services brands, working across asset management, banking and specialist lending. She is Chief Commercial Officer of Kensington Mortgages, the UK’s leading non-bank specialist mortgage lender.