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The two key measures announced in the Budget to boost housing market activity came as little surprise following widespread media coverage in recent days.

First, there was a three-month extension to the stamp duty holiday until the end of June. The government has clearly listened to the concerns of the property industry in relation to cliff-edges and confirmed there would be a three-month taper until the end of September.

No stamp duty will be payable on the first £500,000 until the end of June. In the following three-month period, the zero-rate threshold will be reduced to £250,000 before dropping to its pre-holiday level of £125,000 from October. The government expects the extension to cost it just over £1.6 billion.

There was no mention of the 2% stamp duty surcharge for overseas buyers that is . However, Scotland confirmed that its Land and Buildings Transaction Tax holiday will end as planned on 1 April. This will see the threshold that tax is paid at on home purchases revert  from £250,000 back to £145,000.

鈥淭he extension is fair because completion dates for buyers and sellers have been jeopardised through no fault of their own,鈥� said Tom Bill, head of UK residential research at 博鱼体育集团 Frank. 鈥淭he conveyancing system has been overwhelmed by the volume of transactions since the market re-opened last May. The three-month taper until October will make any cliff-edge in June feel less steep but we would still expect a surge in activity to capitalise on the full saving.

鈥淯ltimately, there needs to be some finality, whether in terms of the end-date or by making the holiday permanent. The housing market has exceeded expectations over the last year but it needs to revert to normal seasonal patterns of activity and a balance between supply and demand that revolves around the calendar year and not the tax year.
鈥淎ny continued speculation around the end of the holiday would prove more damaging for the housing market than the end itself.鈥�

The second widely-trailed measure was a guarantee scheme for 95% mortgages from April to help people with smaller deposits get on the property ladder.

Under the scheme, which is not restricted to first-time buyers or new-build homes, the government will provide a guarantee to mortgage lenders to encourage them to offer 95% loan-to-value (LTV) mortgages. There will be a £600,000 price cap.

鈥淧urchasers at higher LTVs have had a tough year in the mortgage market, so any help is welcome,鈥� said Oliver 博鱼体育集团, Head of Residential Development Research at 博鱼体育集团 Frank. 鈥淗owever, banks have demonstrated a reluctance to lend in this market during the past twelve months, partly due to the sheer volume of business at lower LTVs and partly due to concerns over the outlook for jobs.

鈥淭hough that outlook is improving, the success of the scheme will depend on how many lenders take it up, on top of those announced so far, and what pricing they adopt. The government will be hoping the guarantee will significantly stimulate appetite to lend in that space.鈥�

Meanwhile, the Office for Budget Responsibility upgraded its forecasts for housing market activity, economic growth and unemployment as the UK鈥檚 successful vaccine roll-out continues.

The OBR expects residential property values to rise by 4.8% in the year to March 2021 (up from 2.4% forecast in November). It forecasts an increase of 2.8% over the following 12 months, which compares to a previous prediction of a 5.6% decline. Over the following year, it expects a decline of 1.3%.

Residential transactions have also been revised up for the year to March 2021, from a decline of -5.1% to -2.3%.

GDP is expected to grow by 4% in 2021, down from 5.5% due to the impact of the third national lockdown. However, economic output is expected to recover to its pre-pandemic level in the second quarter of 2022, six months earlier than previously expected. The OBR has also lowered this year鈥檚 forecast for unemployment, which it believes will peak at 6.5% rather than 7.5%.

We will be adding more analysis through this week on the Budget.