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Budget 2016: Housing reaction

George Osborne imageGeorge Osborne’s eighth Budget was another intriguing one for the property market, particularly the residential market.

He confirmed that the 3 per cent higher rate of stamp duty for those acquiring a second home or buy-to-let property will come into force at the start of April 2016, but he sprung an almighty surprise by announcing that larger investors will not be exempt from the higher stamp duty, as previously thought, which will apply equally for purchases by individuals and corporate investors.

Although the Government’s reversal on the exemption for large-scale investors is surprising, it is unlikely to lead to a significant dampening of interest in the build-to-rent sector, according Gráinne Gilmore, Head of UK residential research at Knight Frank.

She commented, “Bulk purchases of residential units at the lower value end of the scale will be most affected by the Chancellor’s move, which seems counter to the government’s pledge to provide more affordable housing. But the rental market is an entrenched and growing part of the UK housing market, and as such, institutional investment in this asset class will likely continue to grow.”

It was also announced that home movers who have a period that overlaps between buying one property and selling another – so temporarily owning two properties at the same time – will be given 36 months, rather than the originally proposed 18 months, to claim a refund from the higher rates of stamp duty or before the higher rates will apply.

Disappointingly for buy-to-let investors, landlords have been excluded from the cuts the Chancellor made to the capital gains tax (CGT) rate. So although the higher rate of CGT will be slashed from 28 per cent to 20 per cent from April 2016, and the basic rate will drop from 18 per cent to 10 per cent, CGT rates for second homes will remain unchanged.

Lucian CookLucian Cook (left), Savills UK head of residential research, said: “Keeping the old rates of CGT on residential property will make it more difficult for existing buy-to-let investors to reorganise their portfolios towards better performing property. It will also act as a longer-term disincentive to invest in residential property compared to other asset classes, which may put further pressure on the supply of private rented homes against the backdrop of rising demand. That may well put upward pressure on rents.”

The chancellor said steps would be taken to speed up the planning system, including a reduction of the number of stages developers must go through to get planning consent, reducing the delays caused by planning conditions and ensuring that more new homes are delivered.

Laura Smith, CBI Head of Construction and Manufacturing, said, “The Government’s announcements on opening up the planning system and fast tracking the release of public sector land demonstrates its focus on housing.

“However, a vibrant and healthy housing market requires a mix of tenures. The decision to apply higher stamp duty to larger investors will damage the UK’s emerging Build to Rent sector and risks undermining progress on building enough new homes.”

The Government has committed to finding fresh public sector land for the construction of more new homes. Local authorities will work with central Government to find land for at least 160,000 more homes.

More garden towns
The Government said it wanted to see a significant increase in the number of new garden towns and cities with the potential to deliver more than 100,000 homes and make it easier for local authorities to work together to create new garden towns, as well as providing technical and financial support to areas that want to establish garden villages and market towns of between 1,500 to 10,000 homes.

Andrew Thorley, Regional Director at Taylor Wimpey Strategic Land North West, said, “Following George Osborne’s recent announcement in the Budget on the promotion of garden villages and towns across the country, we look forward to working with local authorities in the North West to develop and nurture these ideas.

“To meet the Northern Powerhouse goals we need to be ambitious. These changes will be a key part in helping us to fulfil the cross section of housing needs and achieve higher levels of economic growth in Greater Manchester and the surrounding areas.”

Here are a few more property industry reactions to the Budget 2016:

Martin Bikhit, Managing Director of Kay & Co commented:
“It was pleasing to see that the Office for Budget Responsibility has predicted a steady growth rate in the British economy of around 2% until 2020. This, when combined with the announcement of the Crossrail 2 north-to-south train line through London will positively effect the London property market, as we have seen areas such as Paddington benefit from investment and rising property values due to the original Crossrail.

“We welcome the announcement that Capital Gains Tax is to be cut, as it allows greater investment into London; we hope to see more people investing in the London property market  as a result of this policy. Unfortunately, the higher rates of Stamp Duty Land Tax that were announced in 2015 and the 3% surcharge on buy-to-let properties and second homes will continue to stifle the property market in London.

“The announcement of a policy to help the redevelopment of brownfield land that is currently owned by local authorities is laudable, as it will help to create more affordable housing within London. Due to the location of these brownfield sites, we hope that the development will be organic; and benefit the local communities around the brownfield sites.

“In the main, if the economic growth forecasts referred to by the Chancellor are correct, and if the UK economy can continue to grow as it has been doing then that, combined with the international cache of London as a centre for culture and business should ring-fence the London property market against any tremors in the global economy at large.”

Andrew Bridges, managing director of Stirling Ackroyd, remarked:
“The Chancellor is chancing London’s status as a world-leading capital. What Londoners needed today was a bold move to free the capital from housing uncertainty – but what we got was mainly a bigger bet on the same status quo.

“If incremental, the direction of travel seems correct. Today might be a starting point in tackling the complex planning system. A more integrated effort between local councils and central government may help. Too often, the multiple stages of planning applications deter builders, and deny Londoners new homes.

“But the biggest problem will be transforming attitudes. Across 2015, London borough councils rejected 23% of potential new homes. Even if everything goes exactly as hoped-for in the latest Mayoral plan, London will face a minimum yearly shortfall of 6,450 – a massive 13% of the new homes needed unless boroughs exceed targets.

“Policies to increase density on brownfield sites is good news and should encourage more development. Higher density buildings near the centre of London provide the key for housing – helping more people onto the ladder. But again, the practical means by which this is done still needs to be fleshed out.

“The Chancellor may have a long term plan for the economy – but a viable long term plan for housing in London remains to be seen.”

Paul SmithPaul Smith (left), CEO of haart estate agents, said:
“The country’s housing shortage can only be solved by boosting the supply of new homes, and the government could have gone further in making this a priority. While the Lifetime ISA is a positive step forward that will make it easier for people to save for a deposit on a home, more should have been done to bring housebuilding into greater focus.  In his budget, George Osborne claims to put the next generation first, but this missed opportunity means that the supply of homes will continue to be low, leading to greater pressure on prices, which will largely affect first time buyers in the majority.

“Frustratingly today’s budget was also a missed opportunity to look again at stamp duty on residential properties, which is one of the biggest issues currently affecting the lack of supply. The most recent changes have only served to hold back the sale of higher value properties, which has a knock on effect on the supply of homes across the entire market and prevents people from moving up the chain. The Government needs to encourage downsizers and a stamp duty holiday for those in this market would be just one key measure to stimulate the supply of larger family homes.

“In the buy to let sector we have seen a surge in purchases ahead of the extra 3% stamp duty for landlords being introduced in April, but we’re now likely to see a significant fall in buy-to-let purchases as soon as the new measure is introduced. That might result in a levelling out of prices but it will also mean less investment into new build buy-to-let properties, which is essential for anyone who cannot afford to buy, especially in London. Tenants are likely to be the biggest losers as landlords pass on the increased costs through rent rises.

“The property market appears to have been spooked by uncertainty around Brexit in the last month, with fewer people selling, and this was the government’s chance to support the residential market. But they have done little that will increase the supply of homes for sale in the short to medium term.”

Adrian Gill, Director of Your Move & Reeds Rains, commented:
“The next generation of Britons looking for a home do indeed face a cocktail of risks.

“From a property purchase market where canny sellers secure nearly ten percent more than a year ago, from drastically insufficient house building across the UK – and from rents increasing at ten times the rate of CPI inflation. In a sellers’ market we need a builders’ generation.

“Supply of housing should be priority number one. And for that reason, political punishment for professional landlords offering quality homes to rent should be nowhere on the agenda.

“Help to Save is a welcome addition to Help to Buy. New rail lines and faster internet are brilliant ambitions. Jobs and wage growth are vital. But if there are not homes to live in, very little of this will be helpful – or affordable for the next generation. We still need detail on planning reforms, but these changes should be truly sweeping to have a radical impact for anyone struggling to buy, or struggling to rent.

“In the UK, tackling productivity weakness means tackling housing supply. Drag from the financial crisis is being replaced by drag from serious and permanent problems with housing and infrastructure. The next generation needs homes. This generation needs to start building them. And the government must avoid making it harder for people to live in them as tenants.”

Nick Leeming, Chairman at Jackson-Stops & Staff, said:
“The UK is in desperate need of a housing policy which caters for the long-term, reflecting the future needs of a growing population and changing demand for property type and tenure, which looks beyond the next Parliamentary period. We are also in desperate need of more homes. Today’s Budget was a prime opportunity to outline a progressive policy but unfortunately housing did not take centre stage – which is very disappointing. We need more incentives, and easier processes, for small and medium-sized housebuilders to get building. The construction industry in this country saw a significant slump after the economic downturn, with many industry leaders taking the opportunity to step down. Those skills have therefore been lost and successive governments have introduced few incentives to build them back up.

“Lifetime ISAs, outlined today, are another supportive measure for first-time buyers and are a significant boon for those looking to save for a home. However, this is another measure which boosts demand and today we heard very little about supply – increasing housing supply is key to easing property price growth.

“There was more to celebrate in terms of infrastructure with the news that Crossrail 2 has been given the go-ahead. This is a significant boost for London’s connectivity to key areas like Hertfordshire and Surrey. With average property prices in the Capital now more than £530,000 according to the Land Registry, London is out of price for many. This new transport infrastructure helps bridge the gap by providing more commutable options. Key stations on the line are likely to see a spike in demand, and consequently property prices. Buyers should take advantage early to avoid disappointment.

“The confirmation that there will be a 3% stamp duty surcharge for second home owners is a real blow – and the brunt of this change will be felt by tenants and not landlords. There was no detail given today in the Chancellor’s speech and there are many questions unanswered before April 1st. However, our analysis shows that house price inflation over the next year will absorb stamp duty costs for landlords under the new regime in eight out of 10 regions across England and Wales, so the intended deterrent effect of the new policy is limited. Where landlords don’t want to shoulder the additional stamp duty cost, this will be passed on to their tenants in the form of rent – effectively making this a tenants’ tax.”

Richard Sexton, director of e.surv chartered surveyors, noted:
“First-time buyers may be feeling disappointed by today’s lacklustre budget announcement, which failed to address the lack of housing supply, again skirting over any substantial changes to planning reforms. The same problems will remain – not enough properties are coming onto market, not enough new homes being built – and its first-timers who are seeing future dreams of a home drifting further out of reach.

“Although the Help to Buy ISA has proven popular, many are finding it increasingly difficult to save. The new lifetime ISA has the potential to increase savings ability – but the average deposit in January stood at £28,393. By this measure it would take an individual first-timer 6 years in order to save this amount. On the Help to Save Scheme it would take 32 years. And across these timeframes, house prices will keep on climbing across the country. Time is not a luxury that first-timers wanting to move to start a family or settle into a new home may have.

“The North East boasts the lowest average house price in England of £108,395. As the Northern Powerhouse momentum continues however, boosted by HS2 and the newly announced HS3 this first-time buyer haven could also become an unreachable location for many. The Government needs to do more to tackle house prices – the next generation of homeowners are being overlooked.”

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