Shorter Reads

Four factors facing the residential property market in 2021

In a year where we have spent more time in our own homes than perhaps ever before, what does 2021 hold in store for the residential property market?

Here we make a few predictions.

1 minute read

Published 4 January 2021

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No cliff-edge on property sales

The stamp duty holiday comes to an end on 31 March 2021, but we do not expect to see the property market fall off a cliff edge, says Janet Armstrong-Fox and Head of Private Client Property.

The property market is buoyant with considerable pent-up demand. There is a large number of sales and purchases in the pipeline that are unlikely to complete before the end of March and we would urge the Government to extend the SDLT relief to include properties that have exchanged, but yet to completed by that date.

We think it unlikely that demand in the housing market will significantly fall away in 2021, with high value, prime properties remaining particularly strong.

Escape to the countryside

2020 has seen exceptionally strong interest in country properties, albeit within striking distance of London, says Janet Armstrong-Fox, and that is expected to continue throughout 2021.

The escape to the country will continue with homebuyers prepared to move further from London in expectation of continuing to work part of the week from home. Those under 40 are more likely, however, to hold on to or purchase a pied-à-terre in London.

Capital gains tax

With the government desperately needing raise additional tax revenue to fill the Coronavirus-shaped hole in the nation’s finances, changes to capital gains tax (CGT) will be firmly in Chancellor’s sights, says Andrew Mason, an Associate in the Tax and Estate Planning team at Collyer Bristow.

A recent review of CGT commissioned by the Chancellor recommended cutting tax free allowances and that rates of CGT should be brought in line with income tax rates, which could see the top rate of CGT on residential property rising from 28% to 45%. Having already been restricted in recent years, principal private residence relief, which currently exempts homeowners from CGT on the sale of their main home, could be cut further. All of which would be bad news for homeowners.

A further suggestion from the ONS is that the current tax-free uplift on death to current market value might be scrapped, triggering CGT on any latent gains in the deceased’s property, in addition to any inheritance tax that may be charged at the same time.

While suggestions of changes to CGT remain speculative at this point, the government has now set 3 March 2021 as the date of the Spring Budget, so watch this space.

Inheritance tax – changes to APR or BPR?

The All Party Parliamentary Group on Inheritance and Intergenerational Fairness reported in January 2020 on potential reform and simplification of inheritance tax, says Andrew Mason.

Suggestions made in the report included replacing the current rules with a flat tax 10% on both lifetime gifts and transfers on death and scrapping or restricting the wide array of reliefs currently available, including business property relief and agricultural property relief.

The Chancellor did not take up these suggestions in his March 2020 Budget or the Summer Statement but with inheritance tax receipts falling for the first time in 10 years in 2019/20, he may look to revisit this area in 2021.

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Shorter Reads

Four factors facing the residential property market in 2021

In a year where we have spent more time in our own homes than perhaps ever before, what does 2021 hold in store for the residential property market?

Here we make a few predictions.

Published 4 January 2021

Associated sectors / services

  • Residential property

Authors

No cliff-edge on property sales

The stamp duty holiday comes to an end on 31 March 2021, but we do not expect to see the property market fall off a cliff edge, says Janet Armstrong-Fox and Head of Private Client Property.

The property market is buoyant with considerable pent-up demand. There is a large number of sales and purchases in the pipeline that are unlikely to complete before the end of March and we would urge the Government to extend the SDLT relief to include properties that have exchanged, but yet to completed by that date.

We think it unlikely that demand in the housing market will significantly fall away in 2021, with high value, prime properties remaining particularly strong.

Escape to the countryside

2020 has seen exceptionally strong interest in country properties, albeit within striking distance of London, says Janet Armstrong-Fox, and that is expected to continue throughout 2021.

The escape to the country will continue with homebuyers prepared to move further from London in expectation of continuing to work part of the week from home. Those under 40 are more likely, however, to hold on to or purchase a pied-à-terre in London.

Capital gains tax

With the government desperately needing raise additional tax revenue to fill the Coronavirus-shaped hole in the nation’s finances, changes to capital gains tax (CGT) will be firmly in Chancellor’s sights, says Andrew Mason, an Associate in the Tax and Estate Planning team at Collyer Bristow.

A recent review of CGT commissioned by the Chancellor recommended cutting tax free allowances and that rates of CGT should be brought in line with income tax rates, which could see the top rate of CGT on residential property rising from 28% to 45%. Having already been restricted in recent years, principal private residence relief, which currently exempts homeowners from CGT on the sale of their main home, could be cut further. All of which would be bad news for homeowners.

A further suggestion from the ONS is that the current tax-free uplift on death to current market value might be scrapped, triggering CGT on any latent gains in the deceased’s property, in addition to any inheritance tax that may be charged at the same time.

While suggestions of changes to CGT remain speculative at this point, the government has now set 3 March 2021 as the date of the Spring Budget, so watch this space.

Inheritance tax – changes to APR or BPR?

The All Party Parliamentary Group on Inheritance and Intergenerational Fairness reported in January 2020 on potential reform and simplification of inheritance tax, says Andrew Mason.

Suggestions made in the report included replacing the current rules with a flat tax 10% on both lifetime gifts and transfers on death and scrapping or restricting the wide array of reliefs currently available, including business property relief and agricultural property relief.

The Chancellor did not take up these suggestions in his March 2020 Budget or the Summer Statement but with inheritance tax receipts falling for the first time in 10 years in 2019/20, he may look to revisit this area in 2021.

Associated sectors / services

  • Residential property

Authors

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