Impact of the budget on property prices

The spring Budget extended the stamp duty holiday and business rates relief for a further three months, and introduced 95% government-backed mortgages for homes valued up to £600,000.

After June, business rates will be cut by two thirds for the remaining nine months of the fiscal year.

Although these measures were welcomed, there is disappointment amongst landlords for commercial properties that more was not done particularly to close the difference between online and physical traders.

Prior to the Budget it may have been thought there would have been a slow down in the housing market after 31 March 2021 had the stamp duty holiday not been extended. However since the budget it is now increasingly likely there will be a continuing house price growth. Rightmove reported house enquiry volumes hit a record in January and according to Nationwide Building Society house prices rose in February. Looking ahead there is a danger the 95% government-backed mortgages and extension of the stamp duty holiday for homes up to £500,000 tapering to £250,000 from June to end of September 2021 could create a bubble in the housing market. A contributing factor could be the substantial stockpile of savings by households.

The chancellor is hoping the household savings will lead to a consumer led recovery on the end of the lockdown. With not much interest being earned in the bank and inflation eating into those savings, households may use some of this money to invest in buying property thereby further increasing the possibility of a house pricing boom. If it does lead to a house price boom this could lead to house price bust situation aggravating an already delicate economic situation. Do you agree?