Ex RICS chief slams Budget for ‘not doing enough to fix housing market’

This week’s Budget failed to tackle the housing sector’s needs and the new stamp duty thresholds are going to be particularly damaging according to a former RICS residential chairman (pictured).

Jeremy Leaf says: “Although the Chancellor said £3.1bn would be spent on affordable housing, insufficient detail was provided on the unquestioned need to improve numbers to rent and buy as well as transactions, in view of their multiplier influence on growth.

The price of fixing the housing crisis is huge but of not doing enough or quickly is even higher.”

“The price of fixing the housing crisis is huge but of not doing enough or quickly is even higher, not least given the huge cost of providing temporary accommodation and housing benefit.

“We were told more planning officers are to be engaged but applications, not just for private but social housing, will probably not increase sufficiently quickly to raise supply in order to keep prices and rents under control.

“For instance, we believe councils must be encouraged to play a more proactive role in social housing provision.

“Sadly, further incentives were also missing to bring more of the 1.4 million empty homes back into use.

Stamp Duty

“Although failure to maintain the reduction in stamp duty thresholds was disappointing, the consequences for first-time buyers will be minimal.  For example, according to recent Land Registry research, their average purchase price in London was £461,450 so now pay £18,022 and just over £8,000 thereafter.

“In the South East, the first-time buyer average price is below £450,000 so at the higher level the liability will amount to £405. In the rest of the UK, the average first-time buyer purchase price is below the current £300,000 limit. House prices in London and the South East are already a barrier to entry.

“First-time buyers are the engine room of the housing market. They tend to trade up regularly whereas investors purchase similar properties but do not tend to sell often and stay on the lower rungs.

“Of just as much interest to first-time buyers is improving the supply of suitable properties in areas of most demand, deposit raising and lower longer-term mortgage rates.

Deterrent

“However, the increase in stamp duty surcharge on additional homes by 2 per cent from tomorrow will have a trickle-down effect throughout the market by reducing supply. The change is likely to act as a deterrent to further buy-to-let investment from the many older investors who dominate the sector. As a result, supply will not increase sufficiently to keep rents in check and encourage deposit saving for future first-time buyers.

“We find stamp duty presently keeps owners in homes they don’t need or want, reduces choice and inflates cost for those wanting to buy or rent, to say nothing of the effect on job and social mobility. Stamp duty could be replaced by a fairer distribution of council tax which is based on values over 30 years old, particularly for higher-end homes.

“On the other hand, by not increasing CGT on the sale of second homes, the Chancellor has at least reduced the risk of a significant disposal of buy-to-let and second homes.

Landlords leaving

“We need to stop good landlords leaving the PRS despite record rents and lowest buy-to-let mortgage rates for more than two years, especially as around 1.1 million, or 25 per cent of PRS tenants, pay housing benefit to landlords effectively providing social housing that the government is unwilling or unable to offer.

“Tenants want to pay their mortgage, not their landlord’s, so keeping rents in check to help deposit-saving and improve buying prospects is crucial.

“This financial statement won’t be judged today for its impact on improving supply and activity as the Chancellor’s speech forms only a relatively small part of total measures. Inevitably other aspects will only become apparent, in the hours, days and months ahead – that is the time to decide.”

Jeremy Leaf is the owner of estate agency Jeremy Leaf & Co.