Rousing it was not, but there was one element of interest. Chancellor Philip Hammond announced that stamp duty for first-time buyers on all properties worth £300,000 or less in the UK would be abolished. In London, for homes worth up to £500,000, first-time buyers will pay no stamp duty on the first £300,000.
The chancellor said: “Put simply, successive governments over decades, have failed to build enough homes to deliver the home-owning dream that this country has always been proud of.
“Today we set out an ambitious plan to tackle the housing challenge.”
First-time buyers
On the face of it, the headline-grabbing pronouncement is a trigger to draw more first-time buyers into the market, while the other proposals announced spur the building of more homes. But will they work?
According to mortgage experts, the stamp duty abolition will create demand from first-time buyers and thus lead to even higher house prices.
The average first-time buyer deposit was £32,899 in the first six months of 2017, some 16 per cent of the purchase price, according to figures released by Halifax in July.
In London, the problem is far worse. The largest deposits being put down are up to £106,577, more than three times the national average and a four-fold increase in the past decade from £26,701.
Brian Wilkinson, managing director, corporate and professional qualifications at London Institute of Banking and Finance, which awards CeMAP qualifications, said: “Any measures that help first-time buyers take the first step on the housing ladder are welcome.
Key Points
The Chancellor Philip Hammond announced some features affecting the housing market in the Budget
Stamp duty relief will inflate prices if more homes are not built quickly
There was no benefit for landlords
“Increased funding and measures to promote more house building, along with the abolition of stamp duty for first-time buyers, could be a helpful boost for the sector.”
But Simon Wagman, partner at accountancy Blick Rothenberg, warned: “Stamp duty relief for first-time buyers is a great headline comment, but while supply is far too low, this will initially only increase house prices and inflate the market.”
Even the Office of Budget Responsibility (OBR), the independent body charged with analysing public finances, said the abolition of stamp duty meant house prices would go up by twice the amount saved by first-time buyers owing to a tax cut. This means the policy would only benefit home-owners, not first-time buyers.
It has been said many times the UK housing market is broken. On the one hand, Mr Hammond has laid out the blueprint he thinks will fix it; while on the other, he stresses there is no magic bullet.
Alongside the stamp duty plans, the chancellor announced a raft of other measures to drive up the UK housing stock and create 300,000 new homes a year by the mid 2020s.
A review has been launched to investigate why there is a big gap between the number of approved planning applications and the number of new homes being built.
In addition, over the next five years, £44bn of capital funding, loans and guarantees will be injected into the housing market to boost the supply of skills, resources and building land. This is also intended to create the financial incentives necessary to build the extra homes.
Mr Hammond has committed a further £2.7bn to more than double the Housing Infrastructure Fund, £400m for estate regeneration and a £1.1bn fund to unlock strategic sites, including new settlements and urban regeneration schemes.
The government will also kick-start five new locally agreed garden towns in areas of housing demand pressure, to be delivered through public-private partnerships.
However, with Brexit looming, and as yet no agreed deal over the future of EU workers in the UK, the stimulus needed to lift the housing market may struggle at take-off.
Mr Wagman added: “Little will be done to create this number of new homes until a Brexit deal is in place.
“We will rely heavily on European workers to fill the gaps in our construction industry, so if the government are to demonstrate that they can build these homes, they must do a deal on EU nationals living and working here – and quickly.
“Housing developers need people – we need beefed-up planning departments and guaranteed input for EU construction workers. Without these two things, there would be more delay.”
Last-time buyers
The housing plans also missed out some groups of people who could help radically shape up the housing market.
Craig Hall, new build and development manager at Legal & General Mortgage Club, said: “The only disappointing thing around stamp duty is that there is nothing similar for last-time buyers, to encourage people in retirement or going into retirement to downsize and sell their family home.”
Justin Neal, partner and head of real estate at Gordon Dadds, added: “The fact there has been nothing to encourage second-time movers or downsizers, the chancellor’s dabbling will have little, if any, benefit on the housing market.”
There was also no benefit for landlords, who are struggling under the weight of changes that have hit their market. Instead, a 100 per cent council tax premium on empty properties, also announced by the chancellor, has been described as crippling.
This is in addition toMr Hammond banning tenant lettings fees, saying landlords should pay for the agents they appoint themselves. Past Budgets have included the3 per cent stamp duty surcharge on additional properties and the decision to restrict the amount of tax relief a landlord will be able to claim on mortgage interest to the basic rate.
Liz Syms, managing director at Connect for Intermediaries, said: “There was no help for struggling landlords who are housing those who either don’t want to buy or will never be in the financial position to buy their own home.
“This, along with the additional 15 consultations under way by the Prudential Regulation Authority, which will also have an impact on landlords, may well lead to some landlords looking to leave the private rental sector.
“This may not mean they leave property investing, but it may well be more profitable for them to invest in commercial or in holiday homes rather than residential, which will do nothing to help young people who need a home to live in.”
With many levers to improve UK’s housing problem, only time will tell if Mr Hammond has pulled the right ones, at the right time.
Ima Jackson-Obot is a features writer at Financial Adviser
