Yesterday George Osborne delivered his eighth budget as chancellor, announcing an extra £3.5 billion in spending cuts by 2019-20.
The Office for Budget Responsibility (OBR) has forecast that the UK economy will expand by 2% this year, 2.2% in 2017 and then 2.1% in 2018, 2019 and 2020.
Osborne said that the OBR was looking to offer 'long-term solutions' to 'long-term problems'.
The chancellor repeatedly referenced the future, saying it was a 'budget for the next generation' and that the UK needs to put 'the next generation first'.
There were a number of housing and property-related announcements, however there was a lack of 'headline grabbing' measures like the ones announced in the Autumn Statement and last year's Summer Budget.
As expected, next month's 3% stamp duty surcharge on the purchase of second homes and buy-to-let properties will go ahead from April 1.
The chancellor confirmed that larger investors will not be exempt from the stamp duty changes – meaning all purchasers of buy-to-let properties will pay the additional tax.
It was also announced that as of today, the commercial stamp duty system has been reformed.
As with the residential tax reform announced in 2014, the 'slab' system will be replaced with a more progressive 'slice' system.
Purchasers of commercial property will pay 0% up to £150,000, 2% on the next £100,000 and 5% above £250,000.
There was also the announcement of a Lifetime ISA. Similar to the Help to Buy ISA, this initiative aims to help under 40s on to the housing ladder.
Savers will be able to put away up to £4,000 each year until they are 50 in an account where the government will match every £4 saved with £1 of its own.
Other announcements included the cut of Capital Gains Tax from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers, and a £1,000 a year tax break for 'micro entrepreneurs', which looks like it will benefit people who let properties through websites like Airbnb.
Today, property professionals across the country have had their say on the budget. The reaction is largely one of relief – although many commentators are still clearly disappointed with the incoming stamp duty measures.
Capital Gains Tax
“Reducing capital gains tax to discourage further growth in the private rental sector is poor policy making, which simply opens a golden window of opportunity that could encourage people to buy second homes or buy-to-let properties,” says Ian Wilson, Martin & Co chief executive.
“Currently, buy-to-let properties appeal because of the mix of rental returns and capital gains. Reducing CGT is another incentive to buy. Some landlords might be interested in selling to make the most of this window, but if the properties have a strong track record of staying fully let at good rents then the most likely buyer will be another landlord. We are heading towards consolidation of ownership amongst landlords, who will set up companies to avoid additional tax implications and continue to make additions to their portfolios - the reduced Capital Gains Tax burden on exit will simply fuel this.”
Stamp Duty surcharge
“As it stood, the 3 per cent stamp duty hike from April unfairly favoured larger investors at the expense of smaller landlords. In announcing that the new stamp duty rates on additional properties will apply to larger investors too, the Chancellor has balanced it so it is not helping either group, but in doing so he is compromising the chances of improving supply,” says Jeremy Leaf, a former RICS chairman and north London estate agent.
“Those larger investors such as pension funds and insurance companies who would have stepped into the gap created by a lack of smaller investors in the market may now be dissuaded from doing so. In dealing with one problem, he has created another. Anything that keeps the supply of rental property down and prevents investors from expanding their rental portfolios will result in less stock, higher rents and a perfect storm for both landlords and tenants.”
“The Chancellor’s announcement that a new lifetime ISA could be used to help people buy their first home is welcome news,” says Mark Hayward, managing director of the National Association of Estate Agents.
“Helping first-time-buyers (FTBs) to get on the housing ladder should be a priority for the government, limiting this to those aged 40 or under emphasises the real issues for those trying to get on the housing ladder.”