What Is The Current State For Property Development In The UK?
As the world continues to battle the coronavirus epidemic and emerge from it, investors, citizens, and governments are concerned about its impact.
Due to the continuing vaccination rollout worldwide, infection rates have declined, and lockdown measures have been eased. Despite this, the COVID-19 pandemic caused a considerable impact.
Apart from the unfortunate deaths and hospitalization, the pandemic has adversely affected economic development and outlook – a case in point is the property development in the UK.
A quick overview of the current state for property development in the UK reveals a robust performance – increased demand and soaring prices. Historically, the sector has always stood firm during hard times providing long-term capital growth.
Despite damaging other sectors of the economy, the coronavirus pandemic has escalated the demand for houses. This year we have seen a record level of investments in the UK, led by growth in the private rental market.
We expect property development in the UK to continue rising.
What is fuelling property development in the UK?
Sustained price growth in the property market
For one, the property market in the UK is at an all-time high. March marked the sector’s most significant growth as sellers and buyers rushed to complete deals before the stamp duty holiday ended as scheduled.
However, Chancellor Rishi Sunak extended the tax holiday by 3 months due to the high demand.
According to HMRC, about 180K transactions were recorded in March, double the figures recorded in the same period last year. And data from Office for National Statistics (ONS) collaborated HMRC figures and showed house prices increased by 8.5% last year.
Despite the coronavirus pandemic, the sector recorded the highest annual growth rate since 2014. All this came amid restricted property viewings with lenders and solicitors working from home during the lockdown periods.
Scramble for space
The coronavirus pandemic changed people’s lifestyles, and remote working increased. This means proximity does not limit workers to their workstations and can hunt for bigger houses and gardens anywhere.
Many urban dwellers sold their smaller houses in search of better homes helped to push higher average houses and market prices.
Investments in the property market remain lucrative.
Over time, the property market has withstood difficult times, emerging unscathed as the overall economy slump – making the property market the favourite asset among investors.
The UK property market has survived many challenges over the years – Brexit Talks, Economic recession, and various elections – and now the global coronavirus pandemics.
A surging market for the property market – the highest in 16 years – proves that the coronavirus could not dent this well-established reputation; In fact, property prices and demand escalated.
In the pandemic’s wake, investors flocked to the property market because it is a secure investment that provides short-term returns and long-term capital gains.
A helping hand
While other economies slowed down, the property market in the UK continued to register impressive performance. The Government has taken a proactive stance towards the current state for the property development, introducing measures to promote its development and further growth.
To mitigate the negative impact of the coronavirus on the current state for property development, the Government instituted the following policy incentives to assist investors and developers:
– Stamp Duty Land Tax (SDLT) reduction
– 95% government-backed finance
– CBILS development finance to assist developers to kick-start building sites
Stamp Duty Land Tax (SDLT) Reduction
In July 2020, the Government introduced SDLT exemptions for property transactions closing on 31st March 2021.
The exemption enabled buyers to save up to £15, 000 in tax, significantly reducing the overall cost of property financing.
The government introduced it to support the UK property market after the initial lockdown felled demand in the housing sector.
In England and Northern Ireland, the taxation threshold rose to £500K, and in Scotland and Wales, it shot to £250K.
Early this year, customers were scrambling to get the offers before the deadline, resulting in a considerable price increase. Chancellor Rishi Sunak had scheduled it to end on 31st March 2021 but extended it to June in line with other measures to boost the economy.
In the current state for property development, about 300,000 buyers will benefit from the tax extension period.
95% Government-backed finance
On 19th April, the UK government responded to the current state for property development and introduced a 95% government-backed mortgage. A move that gives first-time buyers or existing homeowners the chance to buy a new UK home with just a 5% deposit, regardless of their house value.
The new government-backed scheme cushions homebuyers and creates more homeownership opportunities.
For those who qualify for the 5% deposit offer, the Government will provide loan guarantees of up to £600,000. This will make homeownership more accessible, especially for low-income families.
Clearly, the UK government is determined to address housing inequalities while ensuring that all citizens can afford to live in a decent house.
The CEO of Berkshire Corporate: London’s Leading Property Development & Property Investment Company welcomed the move saying it would “encourage more people to buy their first home in the current state for property development.”
Government-Backed CBILS Property Development Finance
In another inventive way to combat the coronavirus pandemic and uplift the current state for property development, the UK government introduced a new lifeline with CBILS property development finance.
The Government unveiled the Coronavirus Business Interruptions Loan Scheme (CBILS) to help housebuilders and investors to mitigate the challenges of the COVID-19.
Developers can access a maximum of £5m to complete construction work per site. This is also helpful for improving cash flows and repaying current debts.
In addition, the Government will pay construction fees and interest for 12 months.
The UK property development industry is thriving, with both house prices and demand increasing.
Markets have responded positively to recent post covid developments. And once again, in another economic crisis, the property market is outperforming other sectors of the economy.
As the property developers can now leverage CBILS to build more affordable houses, buyers can have their dream homes.
While this is welcome news for the current state for property development in the UK, you can take advantage of the government incentives designed to make buying a house more accessible and more affordable for first-time buyers.
The SDLT extension is ending in June, then CBILS and 95% government-backed mortgage will also come to a close.
If you have purchased your house, that’s great!
… If you still need more details to make the right decision, then contact us.