What the budget had for investors

What the budget had for investors

It’s been a weird 18 months so far, if we’re honest. On the one hand we’ve seen global disruption on a scale barely witnessed since the 1940’s, one which has changed the world and the way we live our lives in almost every conceivable way.

We’ve also seen huge economic shocks across the large Western economies and in the developing world too. The vaccine race has tested globalisation to its limits as powerful nations jostle and compete for a limited supply of what has to be considered the most valuable commodity in the world right now – vaccines.

On the other and, it has to be said – somewhat counterintuitively – there has been some unprecedented growth in certain financial sectors and in other areas of the economy.

For example, tech stocks and cryptocurrency have all soared to ridiculous heights even whilst GDP temporarily dropped off a cliff, whilst US stocks had one of their best years on record. Due to historically low interest rates and record government borrowing guilts and bond yields stayed almost flat amongst the turmoil.

This feels like as good an explanation as any as to why gargantuan amounts of cash have been ploughed into these companies and instruments.

Aside from this, UK property had an absolutely astonishingly good year, and many expect a similar performance in 2021, with the chancellors most recent budget being announced.

Incentives and tax breaks

Whilst the chancellor Rishi Sunak was keen to acknowledge the challenges ahead, it seemed abundantly clear to most that the property market remained very much front and centre of his economic recovery plan.

The headline announcements that were welcomed by landlords were the chancellor’s decision to extend the stamp duty holiday by 6 months into September as well as the decision to back 95% mortgages from the banks and mortgage providers.

There was also encouraging news that the government has announced further big support packages for workers and businesses as well as the self-employed. In terms of reassurances for landlords that their tenants won’t be left in the lurch this should keep things stable over the short to medium term whilst the economy recovers from the pandemic.

Property demand

The main takeaway, however, has to be that the government intend to incentivise as many people as possible to get into the property market or invest further whilst new and existing supply lags so significantly behind.

It’s a basic fact of economics that the further supply is outstripped by demand the higher the price rises. If we consider that prices rose more than 8% in some areas of England last year, and we’re now seeing even further incentives, it’s not inconceivable to see a similar rise or even higher rises this year.

From a rental perspective the Private Rental Sector is seeing similar issues with supply and demand which is seeing rents rise quicker than at any other time in the past decade.

This, in combination, is setting up a potentially monster year for those invested in property in the UK. With the stamp duty holiday continuing on into September now is very much the time to look to more exposure to property if you can arrange it.

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