Chancellor of the Exchequer Philip Hammond delivered his Autumn Budget to a packed House of Commons on Wednesday (22nd November) and in it, he outlined several important policies that could have far-reaching impact for investors in the nation’s property sector.
Breaking the UK’s development deadlock
Chief among the chancellor’s aims in this year’s Autumn Budget was a commitment to tackling the nation’s ongoing housing crisis. As part of this endeavour, he announced a new binding pledge to build an additional 300,000 homes per year over the next five years.
To make this a reality, the government will now invest a further £44 billion in this area. This figure includes £1.2 billion dedicated to government land purchase to build more homes, as well as £2.7 billion for the expansion of infrastructure to support new housing.
In addition, a further £400 million has been made available to regenerate housing estates across the country and £1.1 billion of fresh investment will be delivered to help unlock new “strategic sites for development”.
A review into delays in developments that have already been granted consent will also be launched. It comes at a time when projects up and down the country are being delayed by a range of issues, not least of which are the conflicting interests of development and safeguarding the UK’s green belt areas.
As a result, changes to the existing planning system will help to make better use of sites within towns and cities, Mr Hammond argued. However, exact details of how this will be achieved are yet to be unveiled.
Responding to the plans, Dominick Veasey, associate director at Nexus Planning, said: “The Budget’s wide-ranging package of financial and planning reforms must be welcomed if we are to have any hope of solving the housing crisis. However, it remains to be seen how many of the measures announced will work in practice.”
Finally, the government also announced plans to invest a further £1.7 billion into a new Transforming Cities Fund, further bolstering links between major hubs across the country and expanding the scope for new developments to take place.
Stamp duty changes for first-time buyers
One of the standout announcements from this year’s Autumn Budget was a reduction in stamp duty for all first-time buyers.
Effective immediately, all those purchasing homes up to a value of £300,000 will be exempt from this tax. In addition, first-time buyers in London will receive the same benefit of no stamp duty paid on the first £300,000 of any purchase for homes costing up to £500,000.
It is hoped that this new measure will be of benefit to 95 per cent of all first-time buyers across the UK in the coming years, with 80 per cent expected to pay no stamp duty at all on their purchase.
Responding to the announcement, director and housing market analyst at RightMove Miles Shipside commented: “Speed and getting in early is important for aspiring first-time buyers because supply of suitable properties is limited due to insufficient numbers of new-build property in this sector over the last decade.”
At the same time, Dan Wilson Craw, director of campaign group Generation Rent, told the Guardian: “In areas where first-time buyers are competing with investors for homes, no stamp duty to pay will give them more purchasing power.
“But where they’re competing with each other, it just means they have more cash with which to make an offer.”
Early reactions to what has been viewed as the chancellor’s flagship announcement from this latest Budget have proven mixed, however. While many support the move, the government’s own Office for Budget Responsibility (OBR) called into question the positive impact of the decision on UK house prices.
Far from making homes for first-time buyers more affordable, the OBR argued this reduction in stamp duty could have the reverse effect. It claimed the move could now lead to a rise of 0.3 per cent in overall house values across the country during the coming year.
The body claimed: “The main gainers from the policy are people who already own property, not the first-time buyers themselves.” It added that, while the need for lower savings will be a boon to first-time buyers, the expected rise in prices could counteract any potential gains.
Fall in forecast growth for the UK
Overall, the chancellor’s positive steps to bolster the housing market were delivered against a sombre backdrop of falling predictions of economic growth. Mr Hammond reported UK growth remained steady in 2017, but has been revised down from two to 1.5 per cent, with further reductions over the coming three years. This is to be followed by a return to higher growth in 2021/22.
Meanwhile, inflation has been forecast to peak at three per cent for the remainder of the year, as measured by the Consumer Prices Index, before falling back towards the government’s target of two per cent in early 2018.
UK borrowing was also shown to have fallen by three-quarters from levels recorded in 2010, from £1 in every £4 at the time, to £1 in every £16 at present. It means the nation’s debts are now rising at their slowest pace in the last decade, but the UK still owes approximately £1.7 trillion to its creditors.
In conclusion, the changes announced in this latest Autumn Budget represent a clear indication of the government’s continued focus on supporting first-time buyers and the housing market in general across the UK. At the same time, the government hopes to make it easier and more efficient for developers to get started on new projects up and down the country.