BUDGET OFFERS ‘WHIM AND A PRAYER’ PROSPECTS FOR PROPERTY MARKET

Before the Budget announcement, everyone was pinning hopes that Philip Hammond would use last week’s speech to bring down the curtain on the age of austerity and address Britain’s housing crisis which has led to a slump in housing transactions of approximately 35% since the 2008 financial crisis. To give him his dues, homebuilding took near top billing on the agenda as part of the fulfilment of the Conservative home ownership dream. His launch of brand new ‘body’ ‘Homes England’ - to overcome many of the barriers to building new homes is a step-in the-right direction, but it’s hard not to ignore that feeling a of deja-vue.

The Treasury’s ‘pledge’ to build more homes has been cited many times before, but these well-worn platitudes have not been fulfilled since way, way back in 1969 when a certain Fab-Four group of mop-top Liverpudlians were topping the charts. The likelihood of hitting the ambitious target of 1 million homes by 2050 is slim, to say the least. The ‘urgent’ review of the gap in planning permission and the actual building of houses is also far too little too late and should have been implemented many budgets ago.

The chancellor has committed to £44bn for housing through capital funding, loans and guarantees. That follows reports that Communities Secretary Sajid Javid had pushed for an extra £50bn to tackle the housing shortage. Hammond says the funds will include an extra £2.7bn to more than double the Housing Infrastructure Fund.

Hammond’s proposal to abolish stamp duty for qualifying first time buyers is laudable, but it will do little to solve the housing crisis. If anything, it will simply increase short-term demand without bolstering the supply, inflating house prices even more. The savings purchasers trying to get on the housing ladder will make will be quite minimal. To achieve the maximum saving (£5,000), first time buyers need to spend £300,000, but Halifax’s First Time Buyer review states that 74% of first homes sold last year cost less than £250,000.

More promising perhaps, is the longer-term strategy set out to deliver funding (provided it is directed to the supply-side), planning reform and intervention (e.g. the introduction of wider compulsory purchase powers). Some developers may not be keen on the announcement of a review as to how to deal with homes not being built for commercial, rather than technical, reasons, despite planning permission having been granted. However, they may be intrigued by the suggestion of additional support for SME housebuilders and developers, which will nurture competition and lessen the UK’s reliance on national builders.

It’s encouraging too, to see the government’s intentions to implement planning reforms that ensure more land is available for housing and also the promise of increased financial support, although it does seem that the opportunity to review restrictions around Green Belt land may have been missed.

The Chancellor also announced that Capital Gains Tax (CGT) will, subject to consultation, apply to overseas investors in UK commercial property from 19 April 2018 (effective for residential property from April 2015). This is likely to have implications on the UK attracting overseas investment capital which assists in regenerating UK property and providing employment.

So where does this latest shake-up take us? First off, the Government has to actually execute on a housing plan if the current housing crisis is to be remedied - grabbing headlines with unqualified intentions simply doesn’t cut it. The housing problem isn’t just about budgetary spend. It’s about targeted action. It’s about listening to those-in-the-know within the industry. Whatever the outcome however - there’s little to disguise the difficulties Hammond faces with worsening economic forecasts. The OBR cut the projected growth rate for 2017 from 2% to 1.5%. Its projections for future years were also significantly worse than at the March Budget. And lest we forget that this Government might not actually have the support and staying power to even implement these bold proposals……