It is no life being the Chancellor of the Exchequer on budget day because in many ways you are damned if you do and damned if you don’t. Even though much of Philip Hammond’s UK housing market related budget changes had already been well flagged in the press, he has certainly helped the UK market. While the mass media seemed to focus on a significant reduction in short term UK economic growth forecasts, down from 2% to just 1.5%, it will be interesting to see how the UK housing market responds.
The London property market has been significantly impacted by the Brexit situation therefore, while highlighting general housing market changes in the budget, it is interesting to see the impact these will have on London properties.
Stamp duty changes
One of the more headline grabbing announcements from Philip Hammond was the change in stamp duty which will be abolished for first-time property buyers acquiring houses worth up to £300,000. There were no if’s and but, no talk of consultation periods, this change came into effect on 23 November 2017. In reality this equates to a £5000 saving on the purchase of an average priced London home. While many first time buyers are still struggling to put together a deposit, this move will be a welcome relief.
It was also interesting to see stamp duty relief on property acquisitions up to a value of £500,000. There will be no stamp duty to pay on the first £300,000 and the excess up to £500,000 will be taxed at 5%. When you consider that the average property in London is now valued at £479,000 this reduces stamp duty from £13,950 down to £8950.
Targeting 300,000 new homes a year by 2025
The UK government’s target of building 300,000 new homes a year was central to the 2017 budget and seemed to go down very well. However, we know there is a shortage of suitable housing across the UK, we know the construction industry is struggling to raise finance and there are problems with regards to finding suitably experienced employees. What will the government do about these issues?
The government has pledged to increase the supply of land for building, revisit urban generation schemes and “unlock strategic sites”. A lifting of the Housing Revenue Account caps will allow councils to borrow more money to build homes and satisfy the growing need for social housing. There is also talk of state guaranteed loans for small to medium-sized property development companies – which should open the market to new entrants. Perhaps the only problem is that the current government, in the words of Jeremy Corbyn, promised 200,000 starter homes just three years ago and how many have been built so far? Yes, you guessed it, none…..
Other changes
The Help to Buy Scheme offshoot specific to the London housing market, which provides five-year loans for 40% of property purchases up to a value of £600,000, will receive an extra £10 billion in finance to extend the scheme from 2020 to 2021. There is also talk of “encouraging” landlords to offer tenants extended rental agreements but at this moment in time it is unclear how this might be achieved.