Disappointment in UK as Osborne’s Budget only skims the surface of housing crisis
Few of us expected UK Chancellor George Osborne to do a U-turn in his Budget speech on the tetchy subject of extra stamp duty for additional homes, so we have to move on and realise this is a reality and one the property industry has to work with.
But what is far more important is the effect it will have on the property market.
Personally I still think that it is wrong to add a 3% stamp duty surcharge as I fear it has been a revenue raising exercise rather than a real attempt to even out the market.
You just have to look at how people buying additional homes have affected the market in the months since the new surcharge was announced in the Chancellor’s autumn statement; prices have continued to rise, many first time buyers still struggle to save for a deposit and the much flaunted planning changes are slow coming.
There also seem to be blurred lines
the definitions and distinctions of what the changes to stamp duty mean. The Treasury has released some more details but the ordinary buyer and seller out there are still confused, especially when it comes to a situation where a divorce or separation is taking place or a couple moving in together both have a property to sell.
I am also concerned about the effect on the private rental sector. New homes are not being built fast enough to meet demand and if landlords, as many have suggested, put up rents to meet the additional costs they face not just from stamp duty but also change to interest tax relief, then that will be a major blow.
Supply is a big problem and if lots of landlords, again as has been suggested, leave the PRS then there will be even fewer homes on offer. Also, aspiring first time buyers paying higher rents will have even less to put towards a deposit and I don’t think the new ISAs are the answer to that one.
The proposed planning changes need to be really dramatic to have an impact and councils need a big shove to make finding land easier for self-builders who, incidentally look set to be hit by the 3% stamp duty surcharge.
This is where details are again lacking but it looks as if anyone buying a plot that is on residential land will have to pay the surcharge unless they have sold their existing property first. They can reclaim the tax later providing they sell their current home within 18 months, but it is yet another significant financial burden on those who want to build their own home.
There is indeed much to mull over in the Housing and Planning Bill but doubt remains as to the extent to which the proposals will in practice speed up development on anything other than small sites. And while the decision to earmark brownfield sites for new Starter Homes is welcome, none will actually be ready for occupation before 2020.
So, it was a disappointing Budget. The UK is in the grip of a housing crisis with lack of supply at critical levels. Yet nothing in the Chancellor’s speech addressed the continued upward march of house prices and I fear that the much flaunted planning changes aimed at speeding up the process so that more new homes can be built more quickly will be a long time coming.