Housing and affordability still on the agenda

This Budget was slightly different, in that George Osborne’s speech to the House of Commons did not mention housebuilding or new affordable homes, as previous Budget speeches had done.

But squirrelled inside the document on pages 37-38 was a commitment to come good on its 2015 Autumn Statement pledge to release public sector land for 160,000 homes - 50 per cent more than in the last parliament.

The Chancellor also set out how he would deliver on his 2015 plans to have 400,000 affordable housing starts in place by 2020/21, by launching the Starter Homes Land Fund prospectus, and delivering 13,000 affordable homes two years early by bringing forward £250m of capital spending to 2017/18 and 2018/19.

The Budget promised to work with local authorities to release capacity for 160,000 homes, and construct garden towns and cities which will potentially deliver more than 100,000 homes.

It will provide technical and financial support to areas that want to set up garden villages and towns of between 1,500 and 10,000 homes.

More details are yet to come on the planning and financial flexibilities that will be offered to local authorities who submit proposals to help achieve this ambition.

However, this is nowhere near the 250,000 new homes needed each year, according to research carried out earlier this year by housing charity Shelter and KPMG consultancy.

Brian Murphy, head of lending at the Mortgage Advice Bureau, comments: “This Budget doesn’t do enough to address supply-side issues that are putting pressure on affordability. It may be a Budget for the ‘next generation’ – but the next generation need somewhere to live.

“The plans to support housebuilding in local authorities are welcome, and efforts to streamline the planning process and promote building on brownfield sites are encouraging.

“However, the scale of the imbalance between supply and demand warrants a comprehensive, long-term housebuilding programme. This Budget hasn’t promised any policies that will give housebuilding activity the kick-start it needs to meet necessary targets.”

Stamp Duty

Of greater focus were the changes to stamp duty. The blow to residential mortgages came first in the 2015 Autumn Statement, when the 3 per cent surcharge on second or buy-to-let homes was announced.

This might help the Chancellor’s plans to take steam out of the buy-to-let market Lee Clark

In this Budget, the government has conceded to 36 months for purchasers - rather than 18 months as originally proposed - to claim a refund from the higher rates or before the higher rates will apply, in the event of a period of overlap or gap in ownership of a main residence.

The higher rates will help give £60m towards the government’s investment in community-led housing developments (for first-time buyers) - especially in areas “where the impact of second homes is particularly acute”, the Chancellor said.

However, if landlords with more than 15 properties thought their size would protect them from the stamp duty increase, this Budget set them straight.

Mr Osborne said: “There will be no exemption from the higher rates for significant investors, and the higher rates will apply equally to purchases by individuals and corporate investors.”

Lee Clark, chartered financial planner for Brewin Dolphin, called this a “major announcement”. He says: “Significant investors, both personal and corporate, will be subject to the additional rates of stamp duty, levelling the tax burden with those smaller investors who have purchased a smaller number of properties as part of a blended portfolio.

“This might help the Chancellor’s plans to take steam out of the buy-to-let market, as previous announcements merely created a house-buying frenzy for landlords prior to the end of this tax year.”

Commenting on what this means for smaller investors, Mark Harris, chief executive of mortgage broker SPF Private Clients, says: “The tweaks made to stamp duty on commercial property make it a fairer system and even the higher top rate is unlikely to deter investors. It is more likely to be absorbed into the cost of the asset.

“In future, more buy-to-let purchases will be made through limited companies, even though in a shock move a policy statement supporting the Budget confirmed those buying inside a limited company will still be hit by the 3 per cent stamp duty surcharge.”

Arguably the changes in mortgage interest tax relief were always the biggest hardship for landlords so Mr Harris claims moving an existing portfolio into a company still makes sense for many investors as corporate entities can offset mortgage interest against their tax bill as a business expense.

From 17 April 2016, commercial property will also be subject to new rates of stamp duty land tax (SDLT), levelling the playing field between residential and commercial property investments. The full figures were set out on p114 of the Budget document.

There was another “sucker” punch delivered to investors. David Smith, director of financial planning at Tilney Bestinvest, suggests people selling residential property are losing out on a promised tax reduction.

He explains: “In his Budget, the Chancellor seemed to initially give the industry hope by announcing a reduction in capital gains tax by a whopping 8 per cent, from 18 per cent for basic rate taxpayers and 28 per cent for higher and additional rate taxpayers to just 10 per cent and 20 per cent respectively for all gains.

“However, the champagne corks hadn’t even had a chance to pop before he delivered another sucker blow to the flailing industry by announcing the reduction would not apply to those selling residential property.”

This came as the Chancellor announced tax breaks for small businesses operating online, which prompted Steve Bolton, founder of Platinum Property Partners, to say: “The business of providing somewhere to live for the UK rental population is clearly not valued by the government, despite the fact rental demand is at an all-time high.

“While landlords are battered by higher costs, those renting out property online (for example, through Airbnb) are set to enjoy a £1,000 tax break. The targeted punishment of landlords is astounding.”

Support for homebuyers

According to p37 of the Budget document, consumers spend £270m a year on failed housing transactions, so the government will shortly publish a call for evidence on how to make the process better value for money, and more consumer-friendly.

The Lifetime Isa - which has been covered extensively in other articles in this guide - will give more younger people a flexible savings product to generate a much-needed deposit on their first home.

With a 25 per cent government boost - £1 for ever £4 the person saves - this will help many people reach their homeownership goals, according to the government. Funds can be used to buy a first home, with the government bonus, at any time from 12 months after opening the account.

According to Ben Stanway, co-founder of savings and investment app Moneybox: “The introduction of the Lifetime Isa is fantastic news for first-time home buyers.

“It really is ‘free money’ and provides a great incentive for younger people to start saving as soon as possible. It could be a huge help in saving towards a house deposit and could finally make getting on the property ladder more achievable.”

However, the Budget document - page 35 - revealed the government has set a limit of £450,000 for the property bought using a Lifetime Isa, which given current house price increases, may not get a 20-year-old today very much for their money in 10 or 20 years’ time.

The Budget document also delineates official figures for how many people the government’s Help to Buy equity loan and mortgage guarantee schemes have assisted.

Since the launch of Help to Buy on 1 April 2013, to 31 December 2015, the Help to Buy schemes have helped more than 150,000 people to buy a home.

More than 350,000 first-time buyers have opened a Help-to-Buy Isa, with someone signing up every 30 seconds, according to data from the Tax Incentivised Savings Association.

According to the Department for Communities and Local Government, more than 45,000 people have bought their home under the 2012 Right to Buy scheme.

Figures are not yet available for Help to Buy London, which was announced in the 2015 Autumn Statement.

People can continue to open their Help to Buy Isas until November 2019. They can have a Lifetime Isa too, but can only use the government bonus from one of their accounts to buy their first home.