The UK Government unveiled its 2017 Budget today and the property industry has hailed it as a budget for builders, as Chancellor Philip Hammond explicitly aimed to tackle housing supply and costs head-on.
The primary policy announced today involves the abolition of Stamp Duty for first-time buyers on homes up to £300,000. To take into account higher house prices in London and other areas, it has also been scrapped for the first £300,000 of properties up to £500,000, with a 5 per cent charge for the rest of the £200,000.
The reduction, which is expected to see 80 per cent of first time buyers not pay stamp duty, will take effect immediately in England, Wales and Northern Ireland, while the Welsh and Scottish governments will have to decide separately whether to follow suit.
£44 billion has also been announced to help meet a target of building 300,000 new homes a year by the middle of next decade.
In a bid to speed up building, £1.1 billion has also been allocated to unlocking strategic sites for development, with £400 million going towards the regeneration of housing sites. There will also be a review into delays in developments, putting pressure on developers who do not build on plots that have been granted planning permission. Councils have been given the power to charge 100 per cent council tax premiums on empty properties too.
A new task force will seek to reduce homelessness, while £28 million will be given to Kensington and Chelsea council to provide counselling services and mental health support to those affected by the Grenfell fire, as well as regeneration of the surrounding area.
Finally, the government will also launch a consultation on barriers to longer tenancies in the private rented sector, and how the government can encourage landlords to offer them to those tenants who want the extra security.
A recent Post Office Money report found that nearly half of all prospective first-time buyers (44 per cent) had ruled out the possibility of homeownership for financial reasons, so the stamp duty announcement will be helpful to many dreaming of owning a home.
Indeed, research by Aldermore found that nearly four in 10 (39 per cent) people believe a stamp duty freeze would help reignite a stagnating housing market, while three in 10 (30 per cent) prospective first time buyers said they would accelerate their plans to buy a home if it was temporarily reduced.
Mark Hayward, Chief Executive, NAEA Propertymark comments: “The announcement today from the Government to abolish stamp duty for FTBs will have a positive impact on the market. It’s a smart move to ensure the dream of homeownership for young people can become a reality and will help buyers across the UK, including London and the South East where property prices are higher. ”
However, the property industry is cautiously warning that the step is not a solution, in the face of an ongoing supply shortfall.
John Goodall, CEO and Co-Founder of buy to let specialist Landbay, says: “The headline grabber of Stamp Duty abolition for the vast majority of first time buyers will boost market activity but it won’t magic up millions of buyers; saving for a deposit will remain the biggest hurdle for many. We expect to see more first-time buyers entering the market over the next few weeks because of this, which will help to stimulate the bottom end of the housing market. However, with little stimulation for second and third time home movers to move up the ladder, due to the jump in house prices between three and four bedroom homes, this could lead to a jam in the housing market.”
Charles McDowell, Aldermore’s Commercial Director, Mortgages, adds: “This change could be perceived as nothing more than a sticking plaster. The underlying issue remains that more affordable homes need to be built in the right places. The Government has promised the creation of 300,000 houses a year, this needs to be acted on. House building targets have been made and missed for quite some time. It begs the question: what is going to be different this time round? We look forward to seeing detailed plans as it’s extremely important the Government focuses on building the right housing, in the right places, supported by the right infrastructure, with SME house builders leading the charge.”
“This move will increase the demand for FTB properties and if we don’t have the supply it will push prices up,” agrees Hayward. “We have seen this in areas where Help to Buy is offered, as it attracts a great deal of interest from FTBs.”
The government’s pledge of £44 billion to boost the housing market is important, with a particular focus on smaller and medium-sized building firms.
“Investment and support from the government to encourage and enable (through access to cheaper finance) developers of all sizes to build can only be positive and this, coupled with the tightening of laws around planning permissions and the ability to hold land without development, will hopefully result in the levels of housebuilding required to be delivered,” comments Jonathan Stephens, Founder and MD of Surrenden Invest.
The Federation of Master Builders Chief Executive Brian Berry says the Chancellor “appears to be putting his money where his mouth is”.
“In particular, a further £1.5 billion for the Home Building Fund to be targeted specifically at SME housebuilders can play a significant role in channelling crucial funding to this sector,” he continues. “A £630 million fund to prepare small sites for development and proposals to require councils to deliver more new housing supply from faster-to-build smaller sites will provide opportunities to boost small scale development.”
Goodall, meanwhile, praises the government for appearing to have “finally woken up to the urgent need for more social and private housing”. We welcome the Government’s agreed housing deal with Oxfordshire, as part of its wider strategic investment in the Cambridge, Milton Keynes, Oxford corridor, which will see the delivery of 100,000 homes by 2031, in return for Government support for infrastructure and affordable housing. It should have a positive impact on employment opportunities and on the growth of the local economy.
However, the positive mood is once again cautious.
Hayward comments: “While we welcome this news, we have historically had these announcements from Government to accelerate housebuilding which has not been delivered. It is not a question of ‘how many’, it’s a question of ‘how’.”
The FMB adds: “Whilst the range of housebuilding measures announced today will go some way to aiding the delivery of the Government’s target of an additional 300,000 homes each year, it is disappointing that the Chancellor did not take the opportunity to announce greater reforms to the country’s archaic planning system, which is a major barrier and constraint for many SME developers. It needs to be much simpler and more cost effective.”
Skilled labour crisis
A second major challenge to getting new homes built is the skills crisis facing the construction industry.
“In the long run, the only real solution to chronic skills shortages will be a major increase in the training of new entrants into our industry,” says Berry. “We are therefore pleased to hear the Chancellor has today committed extra resourcing to training for construction skills. With Brexit round the corner the next few years will bring unprecedented challenges to the construction sector. The Government will need to make sure that the sector continues to have access to skilled EU workers, but we are pleased that the Chancellor has today listened to the needs of SME builders.”
Brexit and Capital Gains Tax
Hammond has allocated an additional £3 billion over the two years to help support the UK as it leaves the European Union, joining the already-invested sum of £700 million in Brexit preparations. He has also announced that the indexation allowance for capital gains will be frozen to give corporations reflief for inflation up to January 2018.
“Our long-term phased reduction of Corporation Tax has generated investment and jobs, and raised £20 billion extra for our public services. We are committed to maintaining Britain’s competitive Corporation Tax rates,” said Hammond. “But there is a case now for removing the anomaly of the indexation allowance for capital gains – bringing the corporate system into line with personal Capital Gains Tax. ”
The director of Finance Policy at the British Property Federation comments: “The UK is particularly good at attracting overseas investment capital, much of which goes towards regenerating our towns and cities. Not only does this result in better places to live and work, it supports thousands of jobs in industries as varied as construction and leisure. We are deeply concerned that the Chancellor’s announcement on Capital Gains Tax, which will now apply to non-resident investors, will jeopardise this much needed investment. There is, however, an envisioned exemption for institutional investors, which will need to be carefully considered to ensure investment keeps flowing to the UK.”
The final housing policy of the day is a push for longer-term tenancies in the rental sector, offering renters more security in their accommodation.
Graham Davidson, managing director of buy to let specialist, Sequre Property Investment, comments: “The spotlight was firmly predicted to shine on the housing sector and the Chancellor did not disappoint. It’s exciting to see the government really getting on-board with the challenging property market and keen to address the property shortage we are currently experiencing across the UK. For buy to let landlords, there was a vague nod to offering longer tenancies in rental agreements which may result in some welcome tax relief, but the outcome will remain unknown until the newly promised consultation goes ahead.”
“Despite a challenging few years for the buy to let sector, investors in the north have remained relatively unscathed despite the previous changes to SDLT and mortgage relief,” he adds. “This longer tenancy would not only be of benefit to landlords in terms of minimal void periods, but also their earnings. This, combined with strong capital growth potential is likely to serve as a further boost for buy to let activity in urban cities such as Manchester and Liverpool where more new homes have been promised. Unfortunately for the London market, so much red tape and astronomically high house prices means it’s unlikely this will be enough to result in an attractive property investment.”
Dominic Martin, Head of Operations at Atlas Residential, also welcomes the push for the build to rent sector.
“Providing the customer with greater flexibility and security through long-term tenancies is a positive step forward for the rental market and an acknowledgement that the customer should remain firmly at the heart of everything we do – these are people’s homes,” he comments.
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