Yesterday’s Spring Budget has been criticised by housing experts for not including any significant measures to address the issues in the housing market.
Chancellor of the exchequer, Jeremy Hunt announced no measures that will directly impact the mortgage or rental market in his speech in the House of Commons, while the Budget document itself was also free from any major changes to housing policy.
The Office for Budget Responsibility did however update its forecast on house prices this month and said it now expects house prices to drop 10 per cent in 2023 from their high in the fourth quarter of 2022.
This represents a 1 percentage point larger fall than it previously forecast in November.
A massive growth in homelessness is surely not the type of growth the government wants Polly Neate, ShelterThe OBR also noted that property transactions are expected to drop by 20 per cent this year relative to their peak in the final quarter of 2022.
“Developments since our November forecast have been largely positive, but the economy still faces significant structural challenges,” the OBR wrote in its report.
“Leading indicators from Halifax and Nationwide suggest that house prices have already fallen by 3 to 6 per cent between their peak in the middle of 2022 and February 2023.
“Low consumer confidence, the squeeze on real incomes, and the expectation of mortgage rate rises to come are expected to contribute to continued falls in house prices and a reduction in housing market activity.”
Homeless charity Shelter criticised yesterday’s Budget while chief executive, Polly Neate said the chancellor has “stuck his head in the sand” on homelessness.
According to Shelter, 44 per cent of private renters in England have said rising living costs are making them more worried about becoming homeless.
“Homelessness has almost doubled in the last 10 years and yet again we have a Budget that does nothing to help struggling renters who are drowning in debt and rapidly rising rents,” Neate said.
“It is outrageous that the government has chosen to keep housing benefit frozen at 2020 levels when its own figures show rents have risen by more than 8 per cent in this time.
“A massive growth in homelessness is surely not the type of growth the government wants, so why is it ignoring this crisis? Sleeping rough or being shunted from hostel-to-hostel ruins people’s lives and costs the economy more.”
The National Residential Landlords Association were also critical of the lack of support in the Budget for the buy-to-let sector.
NRLA policy director, Chris Norris said like Shelter, the NRLA was also disappointed to see nothing done for people in receipt of housing benefit payments who “will continue to face an unjust freeze on the support they need.”
“The chancellor spoke of growth yet did nothing to introduce the pro-growth measures that are necessary if the private rented sector’s supply crisis is to be addressed.
“The current system, under which landlords are penalised for providing new homes to rent, only makes it tougher for many renters to access good quality rental properties.
“Without a comprehensive review of how the sector is taxed, supply and demand issues will only become more acute as time goes on,” Norris said.
At the same time, many mortgage borrowers have been reckoning with higher monthly mortgage payments and affordability for first-time buyers remains at a pinch point due to historically high house prices, higher interest rates, and a mismatch between housing supply and demand.
According to the OBR, net housing supply will remain below the 2017-19 average in every year of its forecast.
Michael Saunders, senior advisor at economic advisory firm Oxford Economics noted that low house building remains an obstacle to labour mobility too.
“The chancellor has not reversed the damaging cuts to public investment announced last autumn,” Saunders said.
“The OBR expects a slight improvement in the economy’s potential output from the labour supply measures. Nevertheless, the economy’s underlying growth trend in the next five years will remain low. Further supply-side action will be needed if the UK is to escape the low-growth rut of the last decade.”
Stamp duty
In last year’s Autumn Statement, Hunt announced that stamp duty cuts announced as part of September’s “mini” Budget will remain in place until March 2025.
No changes to this were announced as part of yesterday’s Budget, but tax advisory firm Blick Rothenberg say this “reprieve may be short-lived”.
Stamp duty partner at the firm, Sean Randall said: “Contrary to speculation, the chancellor did not increase the stamp duty additional dwelling surcharge or reform the rules for mixed-use or multiple dwelling transactions.”
“Believe it or not, the surcharge seems good value relative to other regimes and the government has proposed to reform the rules for mixed-use or multiple dwelling transactions ‘to make the system fairer and to reduce the scope for incorrect or abusive claims’.”
“The only question is when this will happen? Reclaim firms will be rejoicing that the chancellor has allowed them to continue making unsolicited offers to recent house buyers to reclaim over-paid stamp duty on highly speculative grounds."
jane.matthews@ft.com
