Now that the UK Budget for 2021 has been announced, it is worth examining in further detail, the potential effects of how its new measures will affect the country – in particular, how the property investment sector will be impacted.
Money will be pushed into the lending sector, so as to better facilitate the growth of 95% mortgages. This has pleased potential buyers, as the deposits required will be greatly reduced. There is one caveat though. The majority of lenders are unwilling to grant these mortgages to those who have spent time on furlough in the past year. This has provided something of a drawback, as many of those who wanted to take advantage of this new initiative, will be unfortunately closed out.
It is also worth noting that 95% mortgages are high-risk products for lenders, so if there are any defaults on payments, then the government has also made provisions to step in to help with these missed payments. This will hopefully give lenders more assurance, but as with any of these new potential measures, whether it becomes a widely-adopted strategy is really up to each lender.
Another area destined to have a larger impact upon property is the stamp duty holiday, which has now been extended to the end of June 2021 in England, with a threshold of £500,000. After June, the stamp duty holiday has been extended until the end of September, but the threshold beneath which it can be applied will be reduced to £250,000. Following this, it will be normalised as only applying to properties purchased at less than £125,000.
In Scotland, the stamp duty holiday lasts only until the end of March 2021, with no extension granted. In Scotland, however, the government intend to invest the money saved from the stamp duty holiday into council tax instead, in the hopes of bringing down the living costs for people.
Property investors are naturally concerned about the state of the market, and its prospects for the year and beyond. However, there is hope on the horizon. With vaccinations taking place at a rapid rate, there is genuine hope that life will return to normal very soon, meaning that people can not just return to work, but also begin to think about holidays, or even just spending money as normal, the sooner investors can begin to feel a sense of security and optimism.
Another point to consider as we move out of lockdown, is that between April 2019 and December 2019, there were almost 22,000 evictions in the UK, but between April 2020 and December 2020, there were between 400-500 evictions nationally, due to government rulings on when and how landlords could evict tenants. This has meant that even during void periods, landlords have not been able to reclaim certain stock of their owned housing. This restriction on evictions has been temporarily extended, but when it does come to an end, there are expected to be a large bank of properties available.
This is not only good for landlords – many of whom are planning to not just evict problem tenants, but also sell the properties involved – but also investors, who are expected to be able to take advantage of this sudden influx of potential property deals.
Therefore, the strategy for investors right now, should be to keep taking action, making connections, and gaining a sense of potential upcoming deals. Stay focussed, stay positive, and look for the opportunities!
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