The Budget
Following the Spring Budget announcement by Chancellor Rishi Sunak on Wednesday 3rd March, Alan Williams, Alistair Mitchell and Tom Good provide commentary on what this means for the property market. It was announced that £1bn would be put towards 45 areas of England as part of the Budget. The Towns Fund will see Colchester receive funding of £18.2m, Ipswich £25m and Lowestoft £24.9m.
Residential sector
The Chancellor has implemented a tapered end to the Stamp Duty holiday. The nil rate band up to £500,000 will end on 30th June instead of at the end of March. A transitional nil rate band up to £250,000 will be in place until September and then return to £125,000 from October.
We are also delighted to see that the Chancellor has introduced more support for first-time buyers with a new mortgage guarantee scheme which will encourage lenders to offer 95% mortgages. This will help first-time buyers who are struggling to raise a large deposit and enable more people to get onto the property ladder. The scheme, set to launch to lenders from April, is also available to current homeowners and applies to properties up to £600,000. Around 80% of properties for sale have an asking price of £600,000 or less, according to Rightmove.
Fenn Wright Managing Partner, Alan Williams, comments: “These measures are significant in that it helps everyone involved in buying or selling residential property if there is a healthy supply of first-time buyers coming into the market. We saw a tremendous surge of sales activity in the second half of 2020 and these measures will help to support the already high levels of demand we have been experiencing. At present, the supply of properties coming to the market is not matching demand but given the constraints of the third lockdown this is not unexpected. A combination of the lockdown exit strategy and the approach of the traditionally busy spring market is boosting confidence and we are confident that supply of new instructions to the market will improve.”
Commercial property sector
Alistair Mitchell, Partner at Fenn Wright comments: “The announced extension of business rates relief for a further 3 months until July will remove what is otherwise a significant burden for those businesses worst affected by the pandemic and lockdown.
Acting on behalf of both landlords and tenants, we have first-hand experience of the immense challenges the lockdowns have caused businesses in the retail, hospitality and leisure sectors and although lease terms and rental obligations can be renegotiated, the liability for business rates is entirely at the Government’s discretion. With the additional 66% relief until December, available to those businesses unable to reopen, we are hopeful this extra support will ensure more businesses make it through the pandemic.
Restart Grants will provide extra financial assistance, providing up to £18,000 and businesses can also benefit from the Recovery Loan Scheme which will replace the existing Government-guaranteed schemes which close at the end of March. As anticipated, the increase in Corporation Tax has been deferred until 2023 and although it represents a significant 6% increase to 25% for larger companies, businesses will at least have two years to plan and budget for the extra tax burden.
Along with Ipswich and Colchester receiving a total of £43.2m from the Government’s Towns Deal Fund, the other most important announcement that should have a significant and positive impact in our region was the confirmation of Felixstowe and Harwich being designated Freeport sites, together with the Gateway 14 site at Stowmarket. Designed to incentivise investment and job creation, this can only further enhance the importance of our area in terms of shipping and logistics.”
Leisure & Hospitality sector
The business rates holiday in England has been extended by an additional three months. That means 750,000 retail, hospitality and leisure properties in England will pay no business rates for three months from 1st April when combined with Small Business Rates Relief, with further relief available for the rest of the year.
The Government has extended the temporary 5% reduced rate of VAT until 30th September 2021. To help businesses manage the transition back to the standard rate, a 12.5% rate will then apply for a further six months, until 31st March 2022.
Tom Good, Associate Partner in Fenn Wright’s Water & Leisure division says “The extension of the 5% VAT cut will be a welcome relief for the leisure and tourism sectors which have represented some of the businesses hardest hit by the pandemic. Many of our clients are currently planning on reopening, with demand from consumers particularly high for domestic holidays over the summer season. The extension will help many larger holiday accommodation businesses in their recovery throughout the year.
The introduction of an interim rate of 12.5% from the 1st October will also help soften the impact on cash flow throughout the winter of 2021-2022 before reverting to the full 20% rate in April 2022. Government data suggests there are around 150,000 businesses which will benefit from the VAT reduction, supporting approximately 2.4 million jobs within the leisure and tourism sector.”