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