A brief guide to the budget

Overall the Budget was helpful for the housing market, although we could always ask for more. The change in stamp duty lifts the vast majority of first time buyers out of the tax and that will help to encourage more activity in the market. But movers also suffer from the tax and it would have been nice to see something to help them too. The commitment to increase building is welcome, but many of the measures will go to consultation, rather than be initiated as policy now, so it will take time to deliver.

The economic outlook for the UK as set out in the Budget is weaker than the Chancellor may have hoped for.  Economic growth is set to slow between 2018-2020 due to Britain’s poor productivity and the expected fallout from Brexit. The latest forecasts do not expect wages to rise rapidly so the squeeze on household incomes will be squeezed for some time yet, but employment will remain resilient keeping some stability. A similar profile is included in the Bank of England’s forecasts which is consistent with interest rates staying low for the next few years.

 

The main measures aimed at the housing market are:

 

Stamp Duty

The chancellor made a bold move to remove all first-time buyers. Raising the threshold for SDLT to £300k for all first-time buyers forever will lift 80% of first time buyers out of the tax.  To account for higher prices in some parts of the country, all first-time buyers buying property up to £500k will benefit from the £300k exemption. That means that 95% of first time buyers will benefit from the change

Overall, we think this is good news for activity levels in the market – FTBs can put the stamp duty saving towards the deposit and buy sooner.  That will also help those at the margin of the mortgage stress tests to pass and so boost demand

But, stamp duty is a significant hurdle for ALL buyers, not just first -time buyers. It is activity amongst movers that is most critical to the growth of transactions in the wider housing market.   While first time buyers face affordability issues, so do movers and without making it easier for these second steppers to move on the supply of property to buy will always be limited, adding more to price pressures.

 

Impact of stamp duty changes for first time buyers

EM

 E  GL  N  NW  S  SE  SW  W  WM  Y&H  ENG
House Price £150,000 £228,875 £365,000 £142,500 £150,000 £140,000 £250,000 £190,000 £140,000 £150,000 £150,000 £200,000
Old SDLT £500 £2,078 £8,250 £350 £500 £300 £2,500 £1,300 £300 £500 £500 £1,500
NEW SDLT £0 £0 £3,250 £0 £0 £0 £0 £0 £0 £0 £0 £0
Saving £500 £2,078 £5,000 £350 £500 £300 £2,500 £1,300 £300 £500 £500 £1,500

 

House building

The government has committed an extra £15.3 billion to support the market, which includes £1.2 billion for the government to buy land to build more homes, and £2.7 billion for infrastructure that will support housing and £8 billion of new financial guarantees to support private housebuilding and the purpose-built private rented sector.

In addition, the Chancellor has initiated an urgent review of the problem of the slow transition of planning permission into new build property.  This will report by the spring statement and was strongly worded to warn developers and local authorities that there should be good reason for blockages rather than ‘land banking’ or NIMBYism.

This will all be helpful in beginning to relieve the issues with supply which has hindered the market for so long, but it will take time to translate into more housing delivery.

 

Buy to let

Changes to Universal credit will help landlords whose tenants are reliant on benefits.  Reducing the wait time for payment by one week to 5 weeks is one facet, but more importantly housing benefit will continue to be paid for 2 weeks to stop tenants getting into arrears.