When is a Budget not a Budget?
Rob Clifford is chief executive of Stonebridge
That’s the question we might all be asking with the news that the Chancellor, Rishi Sunak, has apparently postponed announcing a raft of measures aimed at helping the economy out of its COVID-19-induced doldrums until the Autumn.
While the Treasury has confirmed that the Chancellor might announce some ‘limited measures’ in July, the initial anticipation that this would be an emergency Budget or a ‘mini-Budget’ of sorts now appear to be wide of the mark.
Instead, it would seem that the Chancellor, Treasury and government are taking a ‘wait and see’ approach during the summer months, preferring to review how the economy reacts beyond the easing of lockdown measures and, no doubt, as further returns to ‘normality’ are instigated including the opening of non-essential shops.
At the time of writing, the City of Leicester became subject to the UK’s first local lockdown, due to an apparent spike in COVID-19 cases: creating even more uncertainty about the outlook.
Whether the delay to the Budget announcement is the right approach remains to be seen. For our own sector, there has been plenty of speculation that the government was preparing to announce changes to stamp duty to stimulate the housing market and there would have been few objections to this happening sooner rather than later.
If any changes are now going to be held off until the Autumn, I can’t help feeling that this is an opportunity missed – a chance to give transactions a sustainable boost after the immediate bounce we have seen since mid-May.
There appears to be little doubt that the housing market has seen a welcome spike in the past month. A growing number of statistics evidence that.
Zoopla announced that sales were now just 12% below levels seen in early March with the asking price of those sales 6% up on those from a year ago; Mortgage Brain said that the number of ESIS taken through its system were 51.3% up over the past month with the number of mortgage products available now topping 9,000; while our own figures for Stonebridge show that the number of purchase mortgage applications were 55% up between April and May.
That pent-up demand, which was always going to be unleashed as soon as house viewings and physical valuations were possible, has clearly been working its way into the housing market, which is positive for all stakeholders.
The big challenge now is to ensure this isn’t just a short-term positive and we can continue to sustain the demand. This is where continued Government intervention could make a significant difference, especially to certain borrower demographics such as first- and second-time buyers, downsizers and PRS landlords.
Remortgage activity is likely to continue to be the foundation of advisory firms’ income but it is positive to see the business mix between it and purchasing reaching a more level status. Mortgage Brain data suggests that the mix looks much more like it did pre-pandemic and again, our own data, certainly shows that.
Now is time for the government to do that bit more and the most obvious way to help stimulate purchase activity further is through stamp duty measures.
Short-term ‘suspensions’ of charges could work but they tend to produce unwieldy spikes which put pressure on the housing market particularly the conveyancing sector, and inevitably lead to a sharp fall in activity soon afterwards.
We therefore need more systemic, long-term changes which can provide an immediate impact but can continue to keep buyer/seller interest up and to ensure that they have time to act.
It might be deeply unpopular but perhaps now is the time to cut the 3% surcharge that additional homeowners have to pay; there’s no doubting that the private rental sector needs a greater supply of homes both now and in the future.
Many landlords have been forced out by the government’s approach, but perhaps now is time to entice some of them back because tenant demand is only likely to grow.
Overall, I hope that we don’t have to wait until the Autumn for a further boost, especially when it is within the Government’s power to do it much sooner, and to give an essential boost to our market, as it emerges from lockdown.