The Guild's CEO, Marcus Whewell, offers insights on the Budget 2016 and what the announcements could mean for the UK property market.
George Osborne’s budget was forecast to be relatively predictable – and so it proved (apart from the so-called Sugar Tax).
Given his limited room for financial manoeuvre, very few commentators expected any significant giveaways. In reality, the summary was more so-called ‘sin taxes’ and proposed reductions in public sector spending (though a little short on specifics), balanced by help for small businesses and moderate gains for individual savers (via higher ISA allowances and a raising of personal tax thresholds).
With regard to the housing market, any (small) benefits will be felt indirectly. The small encouragement to savers (see above) will help buyers with regard to accumulating deposits. Also, the commitment to big transport projects such as HS3 and Crossrail may help to alleviate the severe housing congestion in certain locations by improving commuter times – all assuming the projects survive until completion.
The Chancellor confirmed his intention to raise Stamp Duty rates for the buy-to-let market, and also focused on UK taxation on domestic projects for overseas property developers – but this will have little, if any, impact on ‘middle England’. Indeed, these actions may actually drive up rents and reduce the supply of private sector rental properties, which is currently filling the gap left by the dramatic reduction in public sector housing over recent decades, and also the challenged position of housing associations.
But perhaps the most significant aspect of the budget for home movers is ‘general sentiment’ – which is an important factor in determining timing and volumes for the residential market. His ‘steady the ship in the face of growing headwinds’ approach reflects expectations of a reduction in UK growth rates, a marked slowdown in China, and uncertainty around the forthcoming European referendum. This should lead to a slight slowdown in house price rises (probably a good thing) - but will do little to encourage increased housebuilding, which is fast becoming a priority for the UK economy and its growing population.
It is, perhaps, surprising that such a key component of the economy is effectively left to the vagaries of ‘speculative market forces’. The property market represents an important source of tax revenue - it helps people move to secure new employment, it can determine allocation of school places, and also feeds other important secondary markets and businesses such as solicitors, estate agencies, and DIY / home improvement (buyers and sellers).
So, perhaps like the Sugar Tax, there were not too many sweeteners for current and aspirational homeowners!
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