It is agreed industry-wide that there is a great deal of work to do to both assist struggling developers and provide a platform for first-time buyers to access the market. Circumstances have been unchanged for more than two years after the punitive Stamp Duty (SDLT) provisions introduced during 2015 and the result of the Brexit vote, which have both served to stifle inward investment.
New data this week from Halifax and Nationwide revealed a slight surge in annualised house price growth to 4.5% on August to October transactions, though JLL predicting this to reduce to just 1% in 2018. The slow down in price growth is a result of an offset of the SDLT provisions and market caution at all ends of the market, which has in turn filtered down to the mid and lower end properties.
Price levels at the lower end have already hit a glass ceiling for most, with general affordability concerns at the bottom of the market made worse by the new, more stringent mortgage lending regulations. Property enquiries for first time buyers, as a result, are down significantly with ownership itself for 25-34 year olds at a low of 38%.
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With ongoing problems throughout the sector the chancellor has acted on industry commentary with a dual address on SDLT and on underlying supply. Hammond announced his intention to immediately abolish SDLT on first time buyer residential property purchases below £500,000, up to the level of £300,000. The result is an SDLT saving of £5,000 on first time buyer purchases of properties up to £500,000, which will go a fair way to assisting buyers with the ancillary costs of getting onto the property ladder.
The underlying supply issue is of graver concern, and in order to control prices, this will be the key to ensuring affordability for all. The chancellor has pledged a further £44bn of capital and loan funding to support the delivery of 300,000 new homes in England by the mid 2020’s, together with further funding through urban regeneration schemes and the Housing Infrastructure Fund.
Away from the funding commitments, there was little else to ease the pressure on developers of high end property (over £500,000) with SLDT left untouched and inward investment further discouraged with the announcement of an empty property rates premium of 100%. In addition, the chancellor is reviewing a means of forcing developments to go ahead where planning permission is consented. This will be in the form of compulsory purchase orders (CPOs) and perhaps a re-instatement of the Development Land Tax, meaning developers will carry greater risk into new projects.
All in all the Budget looks to be a well-balanced plan to resolve the property market challenges in the medium to long term. Some will no doubt demand more, but this is certainly a step in the right direction for most stakeholders.
Rick Behan is a partner at Shelley Stock Hutter