A Budget to kick-start the housing market?
No documents found.
Last week’s Budget has been billed as the ‘property’ budget and the Chancellor didn’t pull any punches with a range of measures designed to stimulate the sluggish housing market.
But what are the facts behind the headlines and what does it all mean for would-be home owners and those already on the property ladder in Bath and the South West?
The biggest headline announcement was the abolition of stamp duty land tax for first-time buyers for purchases up to £300,000. Those buying properties valued at up to £500,000 will only pay stamp duty over the £300,000 threshold.
This highly anticipated move has been welcomed by many and equates to a £5,000 saving on the average price of first homes to those who qualify.
However, only time will tell if it will really make a difference to the property market here. As a general rule, first-time buyers tend not to pay much stamp duty, so the new measure won’t make a significant difference to the majority of would-be homeowners.
Almost a third of first properties sold in 2016 were below the stamp duty threshold, according to Halifax’s First Time Buyer review. This means that 29% of people who bought their first home last year would have seen no benefit at all from the Budget’s key announcement.
It will only benefit those first-time buyers purchasing high value properties, who probably already have the savings or funds at their disposal to take that first vital step on the property ladder.
For those looking at the higher end of the market, the sting in the tail is that after £500,000 stamp duty applies, so for a property priced just over the threshold, the £5,000 saving will be immediately lost.
Of course, existing homeowners will not benefit financially although the measure may help them sell their property to first-time buyers. It has been suggested in some sections of the financial press that the measure may result in higher sales prices as sellers seek to take advantage of this reduction.
Perhaps a bolder move by the Chancellor would have been to reduce stamp duty for those at different stages of property ownership? For example, those looking to move up the ladder into their second home or empty nesters seeking to downsize. This would ultimately create more movement in the market, enabling homeowners to go up or down the ladder, depending on their situation and freeing up properties for first-timers as well as families looking for larger homes.
Another key property announcement was that the controversial help-to-buy scheme is to be extended. This is despite widespread concerns that it contributes to rapidly escalating house prices and adds to larger developers’ profits. The budget confirmed that an extra £10bn will go into the scheme to extend it to 2021, a measure previously announced in October.
The Government also vowed to increase the construction of new homes to 300,000 a year on average by the mid-2020s – up from 217,000 last year. According to Mr. Hammond it is the ‘biggest annual increase in housing supply since 1970’ and the ‘only sustainable way of making housing more affordable in the long-term is to build more homes in the right places.’
To achieve this, the Government will provide £44bn of capital funding, loans and guarantees to support the UK housing market over the next five years. It remains to be seen exactly where the new homes will be located and indeed if any will be in the South West.
However, Mr. Hammond outlined that the building programmes will focus on urban areas where people want to live and where the most jobs are created, with the aim of building quality, high-density homes in city centres and around major transport hubs.
As the Chancellor has quite rightly pointed out, there is no single magic bullet to solve the UK housing crisis. Simply pouring money into the market without fixing the other elements of supply will simply create more house price inflation aggravating the problem, not making it better.
First-time buyers are the lifeblood of the housing market and any measures to make it easier for people to get the keys to their first home must be welcomed. But given the mountain to climb to stimulate the market, perhaps there needs to be more focus on those at different steps on the ladder?
No documents found.