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COVID-19: Is the UK government doing enough to support property investors?

Jamie Johnson is chief executive of FJP Investment

When Chancellor Rishi Sunak delivered the long awaited 2020 Spring Budget, it was clear that many of bold policy announcements the government had originally intended to announce had been removed from the final policy document.

Having come to power to December 2019, this was meant to be Prime Minister Boris Johnson’s opportunity to follow through on his election pledges and lay down his vision for the coming five years.

The outbreak of COVID-19 changed all this. While the Budget did include changes relevant to the property market – namely, changes to stamp duty land tax and infrastructure investment – its main focus was to outline what the government would be doing to support the private and public sectors to mitigate the damage caused by the virus. Rishi Sunak’s speech also came hours after the Bank of England cut interest rates to an initial 0.25%.

Since the Budget, the number of COVID-19 cases has risen. As a result, the Bank of England has cut interest rates to an all new low of 0.10%. The government has also been addressing the needs of businesses, consumers and investors by announcing a series of relief packages. These include support grant funds, loan schemes for SMEs and large companies and businesses rates relief.

There has also been considerable relief offered for those involved in the property market. At the moment, homeowners and buy-to-let landlords are able to apply for a three-month mortgage payment holiday.

Since first being announced, over 1.2 million homeowners have taken advantage of this scheme. In this instance, homeowners will still owe the bank the same amount of capital which will continue to accrue interest. However, they do not need to make actual payments during this three-month period. Lenders must also ensure there are no additional fees or charges incurred for those who are using the scheme

Should the government be doing more?

Regardless of one’s political standing, the government’s general approach to COVID-19 has been admirable given the challenges it has been facing. Of course, there are plenty of additional measures that could be implemented to further contain the outbreak and support different sectors of the economy, but these need to be considered within reason. Afterall, the government has finite resources and must ensure it is being fairly distributed to support consumers, investors and businesses.

With lockdown measures likely to continue for the coming weeks, there are questions over whether the Government should consider expanding its relief to those involved in the property market.

Afterall, the property market has been significantly affected by COVID-19. The construction sites have been forced to shut, new property transactions are being discouraged and social distancing measures have made it difficult to conduct valuations.

Guidelines published by the FCA in March have already stated that the three-month mortgage holiday could be extended depending on the length of the current lockdown.

However, there are concerns that a further extension might not work to the advantage of homeowners. After all, accrued interest on their mortgages will rise during the mortgage holiday, increasing the total debt needed to be paid in the long-term.

Do we need a stamp duty holiday?

Another touted relief measure has been a stamp duty land tax holiday once the COVID-19 lockdown has been lifted. With recent reports showing that house prices are likely to fall over the coming 12 months as a result of declining sales and a perceived lack of buyer/seller confidence, industry bodies are calling for targeted measures to stimulate property investment.

It is argued that by removing this tax for a fixed amount of time, buyers will be more willing to take on new property transactions, thereby boosting house sales and contributing to the rise of house prices. Of course, any such reform would need to be carefully considered and implemented.

For instance, the buyer of a property will only pay off stamp duty once the transaction has been completed, which can take weeks and even months. There is also a broader question over whether the relief should be offered to all those who would normally be liable or a certain type of buyer.

Those who support the stamp duty land tax holiday are concerned the surge of interest for UK property witnessed at the beginning of the year will not return. I, however, am confident that the real estate market will quickly recover from the initial shock of COVID-19.

Stamp duty can indeed deter buyers from acting on their property investment intentions, but rather than introducing temporary measures, I would rather see the government introduce significant reforms as part of the 2020 Autumn Budget.

For now, I believe the government has shown the leadership and commitment needed to help those involved in the property market to overcome the immediate obstacles posed by COVID-19. Should cases increase and lockdown measures continue for months instead of weeks, the government will naturally need to revisit its relief schemes so that ample support is provided for all sectors of the economy.

Jamie Johnson is the chief executive of FJP Investment, an introducer of UK and overseas property-based investments to a global audience of high net-worth and sophisticated investors, institutions as well as family offices. Founded in 2013, the business also partners with developers in order to provide them with funding for development projects.