2020 Budget Reaction


Wednesday’s 2020 Budget unsurprisingly focused on the coronavirus pandemic. This is a significant black swan event and warrants a more detailed article of its own which will follow shortly. For today we will simply summarise the key takeaways for the London market.

Interest Rate Cut

Before the budget, the Bank of England announced an emergency cut in the base interest rate from 0.75% to 0.25% – back to historically low levels. Whilst this measure has been introduced as a fiscal stimulus to address the economic fallout from COVID-19, it does of course make capital cheaper than ever for everyone, not just business. This ultra-low interest rate environment combined with the lack of highly leveraged home owners in prime central London does further reduce any immediate downward pressure on prices.

New Overseas Buyer Stamp Duty 

We have been advising overseas clients on this anticipated extra surcharge for some time. The key questions were always how much would the rate be and when would it be introduced. We now know the additional rate will be 2% (not the 3% many had anticipated). More importantly the charge will be introduced in April 2021 – an introduction this late was one of the most best potential outcomes we were advising clients on. 

We are not surprised the government is unwilling to compromise a stable source of income at a time when significant funding is required to address COVID-19. We are expecting the number of overseas buyers to increase this year as many look to buy before the deadline, although many will certainly be looking to avoid travel and buy remotely. 

Whilst many overseas buyers will be keen to secure a purchase before the April 2021, it is worth remembering that most major global cities already have a similar tax in place. For context, overseas buyers in Hong Kong have to be a rate of 33.3% of the purchase price and HK’s property market is significantly more expensive than London’s. Furthermore many overseas buyers will still be able to offset this additional tax against favourable exchange rates. Even accounting for the ‘second home’ SDLT rate which could be added to this rate for many international buyers, London will still rank behind many global cities for transaction costs. Saying that, we do feel the ‘super prime’ (£10m+) end of the market will most likely see a reduction in prices as it is dominated by overseas buyers who will simply look to pass these costs on to vendors. 


Away from these major announcements, it was good to see Chancellor Rishi Sunak announce a £1bn cladding removal fund and pledge the government will “make sure that all unsafe combustible cladding will be removed from every private and social residential building above 18 metres”.  

First-time Buyers out in the cold? 

First-time buyers may have expected more help from the government but there was no introduction of a mooted first-time buyers discount. In our opinion, the current ‘Help to Buy Scheme’ is fundamentally flawed and benefits major developers more than first-time buyers. Many new builds eligible for this scheme in London are 5-15% overvalued and buyers are putting themselves at a higher risk of ending up in negative equity. Service charges often represent poor value and the lease terms can be rushed and problematic. Our recent purchases for first-time buyers have largely been period property purchases with far better appreciation prospects and more secure forms of tenure. 

If you would to discuss your London property search with Perrygate, contact us today.