Every cloud has a silver lining, so with all the talk of economic growth forecasts being revised down, at a macro level, the future of very low interest rates looks here to stay for quite some time. This is excellent for people looking to buy as money will continue to be exceptionally cheap to borrow.
The abolishing of Stamp Duty for first time buyers of properties up to £300,000 pounds (and also applying that to the first £300,000 for first time buyers of properties up to £500,000) is excellent news.
It is a significant, permanent action (rather than a “tax holiday”) to help increase transactions and help with affordability for those eager to get on the property ladder. It is also a recognition that there is no sharp drop to London property prices on its way – the opposite, in fact: London will remain in high demand as a highly attractive place to live and work for generations to come.
Supply and Demand
In terms of beginning to tackle the big imbalance between demand and supply, there were two specific elements to the budget. First, a drive to penalise landlords with empty properties by levelling a 100% council tax premium.
Second, a drive to close the significant gap between the number of planning permissions granted and the number of homes built. There are currently 270,000 residential planning permissions in London that are unbuilt.
The government is going to examine this delay more closely and if it is for commercial reasons (as opposed to technical) they will step in with direct intervention mechanisms.
This could be interesting, as they might demand that owners of land with planning permission pay taxes on the land if it isn’t developed within a certain period. Legislation along these lines may well reduce the price of building land and therefore pull down the end value of new build properties. This would bring more affordable properties to market, which in turn would help get transaction levels moving more fluidly.
Alternatively, poorly thought through legislation may well have unintended consequences, such as a large decline in planning applications – and therefore supply. The devil will be in the detail, as ever.
For the rental sector, the government announced they would launch a consultation on barriers to longer tenancies in the private rented sector, and how they might encourage landlords to offer them to those tenants who want the extra security.
This is potential good news for serious PRS landlords who want income from their investment. There might even be tax breaks for landlords who receive income from longer tenancies: the review will shed some light in due course.
So, in summary, a helpful budget with some significant actions to begin to address affordability, a plan to help increase transaction volumes and every reason to be confident in the London housing market.
James Evans, Chief Executive of Douglas & Gordon, said: “The Autumn Budget shows a government that recognises the emotional, social and economic importance of the housing market: we welcome these interventions to further support it. However, there remain some fundamental issues around the effect of Stamp Duty across all property transactions, including those of Landlords, that are hampering liquidity, affordability and supply. We recommend a total overhaul of this old-fashioned tax to bring it into the 21st Century with a new policy that is fair and responsible across the board.
At a macro level, the scale of this investment package into housing infrastructure, building programmes and taxation reductions can only mean one thing: long-term house price growth will continue across the board, but perhaps at more prudent rates versus wage inflation. This is a government not only endorsing long-term security in the property market, but recognising London as the global financial capital for the foreseeable future under almost all circumstances”.