Budget 2017: Chancellor outlines plans for housing market

Ryan Fowler

November 22, 2017

Chancellor Philip Hammond has used the 2017 Budget to announce plans to increase the supply of housing and provide further help for first-time buyers.

The moves were much anticipated as even before the Budget the Chancellor was dropping hints about his plans for the housing market.

Speaking on BBC One’s Andrew Marr Show last week Hammond said: “The number of new homes being delivered each year has been increasing since 2010, but there is more we can do.

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“The challenge here is affordability and I think experts generally agree that to start to make inroads on the affordability problem, we have got to be sustainably delivering around 300,000 homes a year on average across the housing cycle.

“That’s a big step up from where we are now. There is no single magic bullet and it’s certainly not just about pouring money in, because if you pour money in without fixing the other elements of supply, you will simply create more house price inflation, that makes the problem worse, not better.”

However this could be easier said than done. As things stand this would represent a drastic increase on the 217,350 new homes that were built in 2016/2017. This figure in itself is up almost 28,000 on the previous year and represented the strongest level of building post crash.

The Chancellor said: “House building stands at the highest level since the crash. It is a remarkable achievement but we need to do better still if we want to see affordability improve. This is a complex challenge and there is no magic bullet.”

Prime Minister Theresa May had previously pledged to take personal charge of the housing crisis.

Speaking ahead of a visit to a housing development in Barnet last Thursday she said: “For decades we simply have not been building enough homes, nor have we been building them quickly enough, and we have seen prices rise.

“The number of new homes being delivered each year has been increasing since 2010, but there is more we can do.

“We must get back into the business of building the good quality new homes for people who need them most.

“That is why I have made it my mission to build the homes the country needs and take personal charge of the government’s response.”

With that in mind the Chancellor ’s 2017 Budget provided a range of proposals to make it easier to get on the property ladder, increase building levels and protect tenants.

Hammond said: “House prices are increasingly out of reach, it takes too long to save for a deposit and rents absorb too much of monthly income. Successive governments over decades have failed to build enough homes to fulfill the home owning dream.”

He pointed to the fact that the number of young people owning their own home has dropped from 59% to 38%, he says.

To help remedy that Hammond  has pledged £44bn over the the next five years to help the housing market. By the mid-2020s there should be 300,000 homes being built every year – the highest level since the 1970s.

He said that Help to Buy had been a start but pledged to do more to support home ownership.

Changes outlined in the Chancellors speech included:

Empty home council tax premium

A 100% Council Tax premium which will be levied on empty homes. Chancellor says it “can’t be right to leave homes empty”.

Stamp duty changes

The Chancellor has taken this opportunity to rethink stamp duty which will be abolished for first-time buyers. It should also be remembered that  the average deposit outside London stands at £24,000 or £72,000 in the capital – the average stamp duty bill for a first-time buyer is around £2,500 on average.

There will be no stamp duty for first-time buyers for properties worth up to £300,000 and people buying a home worth up to £500,000 in high price areas like London will not have to pay stamp duty on the first £300,000.

Planning reform

The government wants homes built in high-demand areas and around transport hubs.  Communities secretary Sajid Javid will make a statement on the plans in due course.

Hammond also pointed out that there are too many unused planning permissions with 270,000 in London alone.

Help to Buy extension

As previously announced by the Prime Minister there will be a £10bn extension to the Help to Buy scheme. This, according to the government, will allow a further 135,000 people to be able to use the scheme to buy property.

Garden towns

Five new garden towns will be built. Up to 1 million homes and accompanying infrastructure to be built.

Industry reaction

The changes announced in the Budget have been welcomed by the industry but there were some reservations.

Paresh Raja, CEO of bridging specialist MFS, said: “After an underwhelming Spring Budget for the property sector, the Chancellor’s focus on reforms to the housing market reform this time around was a welcome, but perhaps short-lived, relief.

“A focus on building more affordable homes was inevitable, and relatively unremarkable. Meanwhile, changes to stamp duty for first time homebuyers was a token move in the right direction, though I question how much of an impact this will have for most of the country.

“For me, it’s disappointing to see the government overlook those already on the property ladder looking to move up the rungs. Families seeking to upgrade to a bigger property will continue to face high stamp duty fees, and with the recent hike in interest rates, there’s unlikely to be significant movement for those looking to make their second or third home purchase. Ultimately, this could fail to free up the number of homes available for first-time buyers and reduce movement in the market as a whole.”

Whilst Fareed Nabir, CEO and founder of LetBritain, said the Chancellors announcements were good news for those who in the rental sector.

Nabir said: “Following the government’s admission that the housing market is broken, it was somewhat of an inevitability for housing to take up a sizeable chunk of the Chancellor’s speech. Adding to the government’s commitment to ban letting agency fees and cap rent deposits, Philip Hammond’s will now offer tax incentives for landlords guaranteeing tenancies of at least 12 months. This is a win-win Budget for landlords and renters in this regard, offering long-term stability and security to the market.”

 

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