On the face of it, this year’s Budget was not what you could describe as ‘housing heavy’ in terms of the measures announced but dig a little deeper and there was enough to keep everyone busy.
The big changes to stamp duty which might have been anticipated did not really materialise. Prior to the Budget, there were some thoughts that Philip Hammond might look to incentivise down-sizers to move by cutting SDLT in order to free up bigger properties for those seeking to move up the housing ladder. That did not happen.
There were also rumours that landlords, instead of getting a u-turn on the extra stamp duty they already pay, might actually have to stomach an increase, which (quite frankly) might have put a considerable extra spoke in the wheel of the buy-to-let market.
Thankfully, that didn’t materialise either and – subject to a consultation due in January next year – the only purchasers who might be looking at a further stamp duty increase are foreign buyers of UK property, with the government likely to put forward its proposal of a 1% extra charge.
Unfortunately, there was no pull-back on the stamp duty paid by landlords and additional home purchasers however Hammond was keen to extend the government’s first-time buyer-supporting credentials.
Following last year’s abolition of stamp duty for first-time buyers, this year the government has extended the cut to those purchasing shared ownership properties up to £500k.
Interestingly, this is also a retrospective measure and those who have bought since the last Budget in November 2017 will also be able to secure a refund on the stamp duty paid. Welcome news if you’ve shelled out a few thousand pounds in the last 12 months.
On Help to Buy, there was a move towards an exit route from a scheme which will have clocked up a decade by the time it ends (and not many schemes can say that). The good news – particularly for developers and builders – is that the current incarnation of the scheme will be extended until 2021 providing a degree of certainty.
After this, we will have a ‘new scheme’ which is only due to run for two years from 2021 to 2023 and it will purely be for first-time buyers to use – the current version is open to all – and will be subject to house price caps dependent on the region where the purchase is made.
This new version of the scheme effectively answers a number of criticisms, not least the fact that existing homeowners were perceived to be benefiting at the expense of first-timers, it was fuelling house price inflation and the house values permitted within the scheme are too high. But the government should beware that its focus on a first-time buyer-only policy does not store up problems elsewhere in the market as it should be clear to all that without people being able to move up the housing ladder, then we are removing liquidity from the market and maybe trapping individuals in their first-time buyer home when they may want or need to move up the housing ladder.
After all, while policy always focuses on new-build supply, there is also the rather large matter of the ‘second-hand’ market which needs to be generating enough sales in enough numbers in order to keep the market ‘moving’.
Supply is not just new-build; supply is also the number of properties being put up for sale and we have some major political and economic uncertainty at present which means many people are cautious enough about selling/buying.
If we do not want a generation of homeowners who are forced to stay put because there are no properties for them to move into, then is the focus on the first-time buyer going to be helpful for the market as a whole?
What will happen to transaction numbers? I wonder if the policies we have at the moment – especially those that have been introduced over the last few years – are conducive to actually squeezing down the number of transactions.
The government may have noticed that the fall in the number of purchase transactions has meant a fall in tax take from stamp duty and it would have helped to have seen some policies which incentivised potential purchasers and injected liquidity into the market.
Normally, we would have to wait 12 months for another Budget in order to see if any of the housing market’s lobbying is effective, but with the Chancellor himself already laying the groundwork for an Emergency Budget – should the government not be able to secure a Brexit deal – one can’t help feeling that we’ll see Philip Hammond at the Dispatch Box a number of times in the coming months, even if housing is not the first item on his mind.
*Paul Smee is Non-Executive Chair at the Conveyancing Association (CA)