What was announced in the 2020 Spring Budget?
March 11th 2020 was a significant day for the UK economy, with the Bank of England responding to the coronavirus outbreak by announcing an emergency cut in interest rates and Rishi Sunak delivering his first Budget as chancellor of the exchequer.
The recent escalation in the coronavirus situation undoubtedly made the Budget a very different announcement to the one the government had originally planned. While much of the chancellor’s speech in the House of Commons focused on the current health crisis, there were some broader measures confirmed that will impact workers, investors and the property market.
Summary of Budget headlines
Here are some of the key talking points from the Budget for the 2020-21 financial year:
- A new Stamp Duty Land Tax surcharge of two percentage points will be introduced on non-UK resident property buyers, which will have an impact on overseas investors and expats. It will come into effect from April 2021.
- Nearly £1.1 billion will be allocated from the housing infrastructure fund to deliver almost 70,000 homes in high-demand areas.
- More than £600 billion is due to be spent on roads, rail, broadband and housing by 2025.
- Further education colleges will receive £1.5 billion to upgrade their buildings.
- Additional funding was confirmed for UK nations and regions, including an extra £360 million for Wales and £640 million for Scotland.
- The UK economy is expected to grow by 1.1% in the coming year (not accounting for the impact of coronavirus), but rebound to 1.8% in 2021-22.
Mr Sunak made some bold promises where UK infrastructure and development are concerned, stating: “If the country needs it, we will build it.”
Interest rates at record low
The Budget announcement came just a few hours after the Bank of England confirmed an emergency cut in the benchmark interest rate, from 0.75% to 0.25%. This was in response to the coronavirus outbreak, with the central bank clearly hoping that lower borrowing costs will stimulate the economy and protect it from the worst effects of the health crisis.
Furthermore, the Bank said it would free up billions of pounds of additional lending to help private banks support businesses.
Mark Carney, governor of the Bank of England, said: “The Bank of England’s role is to help UK businesses and households manage through an economic shock that could prove large and sharp, but should be temporary.”
He added that the decision had been made to reduce interest rates on Budget day to ensure the various measures have “maximum impact”.
The central bank’s decision is likely to have significant repercussions for the property market – most notably a reduction in mortgage costs that could fuel borrowing activity, helping to support price increases and capital growth for investors.
Landlords with multiple properties who have taken on a lot of mortgage debt could see some of the biggest benefits from the lower rates.
Looking at the property sector as a whole, it will be interesting to see if the impact coronavirus has had on stock markets around the world will direct more investment towards real estate.
Property in well-established markets like the UK is viewed by many as a ‘safe haven’ asset, so could hold strong appeal during the current uncertain times.
If you would like to talk about current property investment opportunities in the UK, contact Experience Invest.