Following on from the Chancellor’s budget announcement, Nicholas Barnes, Head of Research for Chesterton Humberts, comments on its implications for the housing market:
As expected with a general election a little more than a year away, the Chancellor delivered a fairly benign Budget aimed at pleasing as many voters as possible. With the broader economy performing above expectation, rising job creation and a return to real earnings growth predicted for this year, the government is in a stronger position to announce giveaways – but unfortunately these did not stretch to re-aligning the stamp duty thresholds to more fairly reflect the increased average house prices.
The main good news items for the housing market are the extension of the equity loan element of Help to Buy, and confirmation of more support for the house building sector in terms of funding and planning reform. There was also some water poured on the house price bubble theory when it was confirmed that the OBR forecasts that house prices will remain below their peak in real terms until 2018.
The only other announcement likely to have a significant impact on the residential property market was the lowering of the threshold for the punitive 15% SDLT rate on the acquisition of residential property via non-natural persons from £2m+ to £500,000+.
On the extension of Help To Buy Equity Loan Scheme: Despite the amount of negative comment about its inflationary impact on house prices, the Chancellor has extended the equity loan part of Help to Buy by an additional four years, until 2020. However, given that the Government is calculating that only an additional 120,000 households will take advantage of this, I do not believe that this will have a significant inflationary effect on house prices.
On ‘Get Britain Building’: The Chancellor’s renewed commitment to ‘Get Britain Building’ is a step in the right direction but his measures are simply not enough to address what is now a mountainous problem.
Our growing population and the fact that we have been building fewer new homes in recent years means that the gap between supply and demand is widening: in 1969/70, a total of 378,000 dwellings were completed across the UK, compared to the annual average over the period of 1990/91 to 2012/13 which was 183,565.
Although the numbers sound impressive, in reality the creation of a £500m Builders Finance Fund for smaller-scale developers (expected to deliver 15,000 new homes), the £150m allocated to Right to Build (which will only provide for 10,000 new homes) and the Ebbsfleet Garden City (15,000 new homes) are unlikely to be drastic enough to make a real impact, especially when we consider Boris Johnson’s plans for 42,000 new homes per annum for London!
The proposed plans for a new Garden City in Ebbsfleet was certainly encouraging to hear as it will provide up to 15,000 much-needed new homes within commutable distance of London, but this is more a case of the Chancellor trying to prove that he is doing something positive about addressing the housing shortage and in the grand scheme of things, it is a small piecemeal attempt to solve a problem which surely requires a more strategic approach across the country.
On Stamp Duty Land Tax: It is really disappointing that the Chancellor did not take the plunge and readdress the mismatch between Stamp Duty and the movement in average national house prices since the starting band was last looked at in 2006. By doing so, he would have provided some much-needed assistance to those households struggling to buy their own home.
Perhaps the only surprise announcement from this Budget was the lowering of the threshold for the punitive 15% SDLT rate on residential properties acquired by certain non-natural persons from £2m+ to £500,000+, which will take effect from 20th March 2014. The Annual Tax on Enveloped Dwellings (ATED) will also receive two new tax bands: residential properties worth over £1 million and up to £2 million will be charged £7,000 with effect from 1st April 2015, while properties worth over £500,000 and up to £1 million will be charged £3,500 with effect from 1st April 2016.
These measures are likely to reduce and possibly eliminate future residential acquisitions of this type which is of course the intention of the Government. Of more direct impact on the market is the possibility that the extension of ATED and CGT on enveloped properties may trigger a spate of sales to avoid a further tax bill.
On the proposed CGT on the Disposal of Residential Properties By Non-Resident Owners: The consultation paper on the proposed CGT on the disposal of residential property by non-resident owners which was promised in his Autumn Statement has yet to arrive but the Chancellor confirmed that it would be circulated ‘shortly’. Hopefully this will not be too long in coming as the tax is planned to be introduced from April 2015 and owners will need time to consider their options once the details of the rates applicable and any exemptions are known – expats will be especially keen to know.
About Nick BarnesHead of Research – Chesterton Humberts
Nick has over 20 years experience within the property research arena, having worked for DTZ and Knight Frank before moving to Chesterton Humberts to head up the Research Department. His career has covered both the commercial and residential sectors in the UK and international markets and includes market research covering investor and occupier markets. He has additionally provided bespoke consultancy services for major investors, developers and lenders.
Nick is passionate about research, without which he believes it is not possible to take balanced decisions regarding any property transaction. It is his long term aim to try to help elevate residential property research up to the same standing as that of the commercial property sector.
Outside of work, Nick is equally passionate about sport and photography and is partial to the occasional glass of red wine!
Nick Barnes can be contacted on 0203 040 8406 or Nicholas.email@example.com