Ham­mond un­likely to be a copy­cat Os­borne on hous­ing in his au­tumn state­ment

Financial Mirror (Cyprus) - - FRONT PAGE -

The prop­erty mar­ket in the UK is likely to be one of the ma­jor is­sues ad­dressed in the an­nual au­tumn state­ment on Wed­nes­day from Chan­cel­lor Philip Ham­mond and it could go ei­ther way.

Ham­mond has be­come the dis­man­tler, the man who has un­done al­ready many of his pre­de­ces­sors’ poli­cies in­clud­ing con­firm­ing the end of the Help-to-Buy mort­gage guar­an­tee scheme which will cease to ex­ist at the end of this year.

While the hous­ing mar­ket has not been hit as hard by Brexit as had been pre­dicted by many, in­clud­ing pre­vi­ous Chan­cel­lor Ge­orge Os­borne, it is still pretty ropey with price rises mak­ing it hard for first time buy­ers to get on the prop­erty lad­der and a se­vere lack of sup­ply so that even al­though more new homes are be­ing built, this is still not enough to meet de­mand.

The rental sec­tor is also close to cri­sis as buy-to-let lend­ing faces new tougher rules and changes to mort­gage tax re­lief for land­lords due to come into ef­fect in 2017 at a time when de­mand is also out­strip­ping sup­ply.

So, here we have two ma­jor is­sues for Ham­mond – land­lords and first time buy­ers. There has cer­tainly been lots of lob­by­ing on be­half of land­lords in re­cent weeks and calls for stamp duty change to help first time buy­ers and those mov­ing onto the sec­ond step of the lad­der.

A poll from last week showed that as­pir­ing first time buy­ers be­lieve that not hav­ing to pay stamp duty would make buy­ing a home more af­ford­able as the prop­erty tax is a sig­nif­i­cant bar­rier to do­ing so.

The York­shire Build­ing So­ci­ety, which com­mis­sioned the re­search, says that stamp duty needs to be re­formed if the govern­ment wants to en­cour­age more first time buy­ers onto the hous­ing lad­der and the tax should be paid by sell­ers rather than buy­ers.

The York­shire es­ti­mates such a re­form would save first time buy­ers in the UK, ex­clud­ing Scot­land, an av­er­age of GBP 3,791 with buy­ers in Lon­don sav­ing the most at an av­er­age of GBP 13,171 as prop­erty is more ex­pen­sive there.

The poll also found that 72% of po­ten­tial first time buy­ers said pay­ing for up­front costs in­clud­ing stamp duty would be dif­fi­cult, 69% said sav­ing for a de­posit is dif­fi­cult and 34% said the monthly mort­gage pay­ments would be hard.

There have also been calls for stamp duty to be re­duced at the op­po­site end of the mar­ket with es­tate agents Stir­ling Ack­royd sug­gest­ing that the prime mar­ket has been badly hit by ad­di­tional rates in­tro­duced al­most two years ago. Some might think that such a move can­not help the first time buy­ers but it may help more peo­ple move up the lad­der and thus free up more homes at the en­try level.

It has al­ways been said that the Bri­tish are a na­tion of home own­ers, but num­bers have been fall­ing. In­deed, new re­search from Euro­pean mort­gage com­pany Credit Foncier showed that while 65% of peo­ple are home own­ers in Bri­tain, it is 73% in Italy, 79% in Spain and 84% in Poland, with France hav­ing the same num­ber as the UK and Ger­many hav­ing less at just 54%.

And it is younger peo­ple, that is first time buy­ers, who are not buy­ing as they can­not af­ford to do so, ac­cord­ing to the first ma­jor re­view into home own­er­ship in the UK in over a decade. The independent Red­fern Re­view, pub­lished last week, said that it is a fi­nan­cial squeeze on young peo­ple that is at the heart of the de­cline in the num­ber of home own­ers and calls for a long term ap­proach to hous­ing is­sues.

It shows that own­ing a home is still the norm for the ma­jor­ity of peo­ple, but home own­er­ship among young peo­ple has fallen over 20% in just 12 years with the two big­gest driv­ers a marked rel­a­tive fall in in­comes of would-be first time buy­ers and their ac­cess to mort­gage fi­nance.

The re­view points out that far more could and should be done to pro­vide a healthy and sta­ble rent­ing en­vi­ron­ment, pro­vid­ing a bet­ter op­por­tu­nity for young peo­ple to save and a bet­ter set of con­di­tions for longer term renters. It con­cludes that just in­creas­ing sup­ply is not enough if the bar­ri­ers to en­try to the hous­ing lad­der are not ad­dressed.

So it is much more com­plex than stamp duty and per­haps Os­borne was right all along with his pol­icy of Help-to-Buy. On the one hand fi­nan­cial help is needed for first time buy­ers, but this kind of prop up can­not go on for­ever and I reckon that is the stance Ham­mond will take.

It has been flagged up over the week­end that Ham­mond’s ap­proach is to help fam­i­lies that are only just man­ag­ing. This might be a sig­nal that he is look­ing at more help for first time buy­ers. But I reckon his fo­cus will be on builders and set­ting out ex­tra fi­nance so that more homes can be built with per­haps a boost for Build-to-Rent. He won’t want to be an Os­borne copy­cat.

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