Go for bold, Philip Hammond
It is three weeks until the Budget and we know already that housing will feature in the Chancellor’s speech on November 22, but the pressure is mounting for him to put property right at the heart of his spending plans.
Calls for him to address stamp duty have been mounting and now a particularly hard hitting report from the think tank Adam Smith Institute calls it an inefficient tax that is not fit for purpose. Indeed it goes further, it points out in no uncertain terms that stamp duty is holding up growth in the housing market.
But what is interesting about the analysis is that it sets out how it believes stamp duty is harming ordinary people. People are living in homes that are too small for them, particularly growing families, they are living further away from their place of work than they would like and older people are prevented from downsising and freeing up more family sized homes.
The report suggests that council tax bills should be increased on the most expensive properties and this change would be a very effective tax cut that would boost growth and improve the fundamentals of the housing market with a single stroke.
This is where I need to point out a few things. We have already seen what effect higher stamp duty has had on the upper end of the housing market with prices falling since a higher rate was introduced in 2014. It has resulted in fewer domestic buyers in the prime market in London, for example.
It has also resulted in sales falling, thus a fall in stamp duty revenue from the most pricey houses in the land. So, it could indeed be argued that scrapping stamp duty would boost the top end as well as the bottom end. Although many first time buyers donít pay the tax if they are buying at less than GBP 125,000, first-time buyers in London have been hard hit as it is more or less impossible to buy a home under this price in the city.
It would seem that scrapping stamp duty would help get the market moving. The latest figures from HMRC show that residential sales fell by 1.8% between August and September.
But if the housing market is to benefit and grow, then there need to be enough houses for people to buy and we already know that lack of supply is at the heart of the current housing crisis, particularly in London. Indeed, the Mayor of London has just published new figures stating that London needs 66,000 new homes a year.
Sadiq Khan points out that the new analysis by City Hall shows that overall government funding for affordable homes in London is still less than half if was seven years ago and it needs to rise fivefold to GBP 2.7 bln a year to be effective.
This comes as a new poll shows that the vast majority of property and development specialists and decision makers believe that both the national and London governments are not doing enough to boost construction in the city with 86% saying that development activity in the capital could be boosted if there was better funding for local authorities and infrastructure, and if priorities are placed on planning and supply of land.
The inaugural London Development Barometer by M3 Consulting also found that there are concerns around the future with 57% believing that there will be less development activity over the next five years and just 19% predicting a boost in development activity over the same period. It points to a clear divide between government and industry priorities, with almost half of respondents signalling the improvement of the town planning process as a first or second ranking priority, whilst traditionally, government backed initiatives such as support for home ownership ranked as the lowest.
However, according to real estate services firm Savills, even this ambitious new target set out by Khan for London may not be enough and says it is well below the 90,000 to 100,000 new homes it has estimated are needed to meet demand and begin to address affordability issues.
It suggests that years of undersupply in the capital means that this new target, while ambitious in the context of delivery over recent years, will not begin to make a dent on affordability and added that co-operation with surrounding essential to relieve housing markets.
It would seem that building more new homes and tax change combined would signal a bold approach if the Chancellor should wish to take this step. Others have suggested switching stamp duty to the seller rather than the buyer and also changing the bands to increase the threshold for no duty to at least GBP 200,000. I am hoping the Chancellor goes for bold. local authorities is pressure in London’s