Budget 2020: key takeaways for the residential market

New 2% stamp duty surcharge for non-resident buyers from April 2021

The government announced the introduction of a 2% stamp duty surcharge for all residential purchases by non-UK residents. The measure will be implemented from April 2021.

What this means for a £1m property is that the stamp duty for an overseas buyer (assuming they already pay the 3% “additional home” surcharge) will rise from £73,750 to £93,750 from April 2021.

There were no further announcements regarding the reform of stamp duty or council tax bands, something that the government has previously indicated it may address.

Points to note: 

• Adopting the policy of a surcharge for overseas buyers will bring the UK into line with many other global property markets. However, it should be noted that a rate of 2% is lower than surcharges in excess of 10% in locations including Hong Kong, Singapore and parts of Canada.
• The new measure will need to be monitored carefully to ensure there are no unintended consequences, including to the forward-funding of new-build developments.
• Any effects of the new tax on overseas purchases may be offset partly by sterling volatility. Since the turn of the year the pound has fallen 3% versus the US dollar, for example, whilst longer term the effective discount on prime central London property in dollar terms since before the EU referendum is more than 20%.
• Furthermore, a wider re-think of stamp duty rates is still needed to increase housing market liquidity and maximise any stimulus the government plans to provide to the UK economy.

When does the 2% overseas buyer surcharge kick in?

• Properties that exchanged before today do not appear likely to be subject the 2% surcharge for overseas buyers, irrespective of when completion takes place.
• Properties that exchange after today will be subject to the 2% surcharge if completion occurs after 1 April 2021. This may affect those transactions involving a delayed completion date.

The government has said that it will issue more guidance shortly.

New homes targets

The Budget reiterated the government’s commitment to creating at least 1 million new homes in England during this parliament, with an average rate of delivery of 300,000 homes a year by the mid-2020s. 

The latest data show around 240,000 net additional dwellings were added to housing stock in England in 2018/19. 

To achieve the target the chancellor announced additional funding for a number existing programmes, as well as promising to explore long-term reforms to the planning system. These included:

• An additional £9.5bn for the Affordable Homes Programme. In total, the programme will allocate £12.2 billion of funding from 2021-22 to build affordable homes across England.
• The launch of a new £400m Brownfield Housing Fund designed to stimulate housebuilding by bringing more brownfield land into development. Bids can be submitted by Local Authorities and Mayoral Combined Authorities.
• A new Single Housing Infrastructure Fund to unlock new homes in areas of high demand across the country by funding the provision of strategic infrastructure and assembling land for development.
• The Budget also confirmed allocations from the Housing Infrastructure Fund totalling £1.1bn for nine different areas including Manchester, South Sunderland and South Lancaster. This is expected to unlock “up to 70,000 new homes”.

Points to note:

• There was a recognition that land availability, as constrained by the planning system, is the “most significant barrier to building more houses”. The housing secretary is due to set out comprehensive reforms to the current planning system shortly, followed by a Planning White Paper in the spring. 
• There will be additional consequences when Local Planning Authorities (LPAs) fail to meet their local housing need, including a stricter approach taken to the release of land for development and more government intervention. The latest Housing Delivery Test figures for 2019 show that more than 100 LPAs failed to meet housing targets.

Cladding post Grenfell Tower

The government will invest an additional £1bn to remove unsafe cladding from residential buildings above 18 metres.