This article, as they say in the world of TV, is a two-parter. In a way it’s a challenge to myself to see how in (or out of) touch I am with the Chancellor, George Osborne, and his view of the property and mortgage markets.
The reason is that I’m writing this first part of the article less than 24 hours before Osborne delivers his Budget speech. Having lived through the last four months of a frantic market, the catalyst for which was Osborne’s stamp duty increase for additional property brought in last December, I’m now waiting to see whether he will exacerbate the situation. Will he create further bottlenecks in the supply chain at a moment’s notice or will he actually take on board the views of the sectors he has so deeply affected?
So, what do I think George will do? It’s just an inkling at this stage, and there’s been no leaks in the press on this, but I suspect we will see some watering down of the stamp duty changes. How weak he might make them is anyone’s guess but I think there will be less favouring of corporate landlords at the expense of individual ones.
Secondly, and it seems less likely given the last few months, Osborne may also put back the deadline. Might he give the market another year to prepare? Six months? The conveyancing profession might well approve. Or will he stick to his guns? After all, another deadline could create another stampede which he will probably want to avoid.
If there are some sops to the landlord population then he might choose to sting that community in another area – what price an increase in CGT for landlords selling up? However, if they sell to a first-timer might they be spared such an increase? Again, it would fit in with Osborne’s intention of levelling the playing field? Finally, in terms of the major issue, housing supply, what can we expect? More resources to be thrown at Help to Buy 1? An idea of what, if anything, will replace Help to Buy 2? An extension for the Help to Buy ISA? Certainly, more focus on generating new supply but there are only limited levers to be pulled in that regard.
So, let the countdown commence. See you on the other side…
And here we are, a couple of hours after the Budget speech. In terms of my prediction for a watering down of the increased stamp duty charges, well, it was quite the opposite. A beefing up no less although it did not favour the corporates. No exemptions for anyone, whether you’re an individual or a corporate, and certainly no putting back the start date. By the time you read this we’ll be well underway.
Some are suggesting this lack of an exemption for ‘larger investors’ will impact on supply coming into the rental sector – the government clearly didn’t buy this argument and, while there have been notable changes in terms of the time it takes to sell a main residence (36 not 18 months), and the fact separate couples will not be taken as ‘one unit’, the original consultation rules have been kept largely the same.
Yes, we did see a change to CGT with the level being cut, but not for residential property so no incentive for landlords to sell. We did see an extension to the Help to Buy ISA in the form of the Lifetime ISA for those under 40 which can be saved in to purchase either a new home or for a pension – the government bonus that comes with it (£1 for every £4 saved) will certainly be welcome but you have to wonder what house prices will have done in the years ahead and how much will that bonus add to the numbers of first-time buyers. Very little I might suggest, particularly if the supply of high LTV lending also dries up.
On the major issue confronting the market – housing supply – there wasn’t a great deal of change. Once again, Osborne promised that the planning system would be speeded up, there will be money going to community-led housing schemes, but not a great deal more. Hopes of hitting the holy grail of 250,000 new homes per year seem not just fanciful, but completely unattainable and perhaps this could best be described as the gaping hole in the 2016 Budget.
Harpal Singh is managing director of BrokerConveyancing.co.uk
