What the Budget means for the property sector

What are your thoughts?

The Chancellor has delivered his first spring budget in the house of commons.  Here we list views from the property experts.

Robert Nichols, Managing Director, Portico London estate agents: “Landlords across the country will be glad that they have not been dealt any new blows in the Spring Budget - but unfortunately the Chancellor will not be reversing the mortgage interest tax relief changes expected to come into effect next month.

Hammond hinted that he doesn’t want landlords forming companies to try and negate the upcoming tax changes, announcing that the tax free dividend allowance for company directors will be slashed from £5,000 to £2,000 from April 2018.

Rather than incorporating, a better idea may be to cut your interest costs by re-mortgaging and getting an up to daterental valuation on your property. Your lender will therefore have to recalculate your LTV, and a lower LTV ensures a better interest rate and a larger selection of lenders.” Robert Nichols, Managing Director, Portico London estate agents.

David Thomas, chief executive of Barratt Developments plc: “We applaud the measures announced today to support the UK’s economy, particularly on skills. With 350,000 workers having left construction since the financial crisis, there is a real need to bring in more young people into the industry with new skills, so the announcements today are important.

Equally important is the need to maintain high quality standards in the drive to build more homes. As a five star rated builder this is something we recognise and are focussed upon.”

Lynda Clark, expert and CEO of First Time Buyer, comments on today’s Spring Budget: “What a shame that we didn’t hear anything in the Spring budget to help first time buyers who play a critical role in keeping the property market moving.

“Given increasing house prices, stamp duty is now paid by three quarters of first time buyers and so it raises the question who does the current stamp duty exemption actually help? Whilst it may help a few, it certainly doesn’t help the majority of first time buyers faced with the task of buying a property in a more expensive area, perhaps near their family or place of work. 

“Pivoting stamp duty and ensuring it is paid by the seller would certainly be a very clear cut way of removing stamp duty costs for first timers without putting additional pressure on. First time buyers play a fundamental role in ensuring a stable and healthy property market, not just by bringing in new life to the buying cycle but also facilitating the completion of potentially lengthy chains. 

“Affordability is a major issue for many first time buyers today and by removing more of the upfront costs associated with homebuying, we will see more buyers move into the market which everyone will benefit from.”

James Davis, CEO and founder of online lettings agency, Upad, comments on today’s Spring Budget: 

The Government is playing with people’s lives and livelihoods

“It must be a first that there was no mention of housing in today’s Budget.

“In particular, it was disappointing to not see a U-turn on the catastrophic decision the Chancellor made in the Autumn to ban lettings agent fees. As predicted, rising rents are already on the cards for long suffering tenants with renting now a necessity, as home ownership is out of reach for most Millennials.

“Tenants are in some cases already paying up to two thirds of their salary on rent, whilst salaries have stayed stagnant. This will have wider consequences if people can’t afford to go on holiday, or spend money on entertainment – the mental health of the country will suffer and other industries will bear the brunt of this lack of spending. The Government need to realise that they are playing with people’s lives and livelihoods. They need to listen to the people.

James Davis continues to say:

Stop landlords from being used as a political football

“Landlords have been used as a political football in the last 12 months, with buy-to-let taxes set to increase from April and no announcement of this being blocked today. Landlords need attracting back into the space rather than being pushed away. Ultimately, it will be the politicians with red faces, as more people fall into arrears and the social housing space, as they can’t afford private rents anymore. Buy-to-let landlords should be enticed through tax incentives, rather than hiking stamp duty, to bring the rental market back into equilibrium.”

Edward Heaton, founder and managing partner of property buying and search agent Heaton & Partners,comments on today’s Spring Budget: “I cannot believe that there wasn’t even a mention of housing in today’s Budget! I would have loved to see the Chancellor get rid of the 3 per cent surcharge for second homes and reduce the overall stamp duty rate for high end properties by making it a flat rate today, but sadly I think this is a pipe dream of those operating in the prime market, who are witnessing it continue to be stifled by stamp duty. What the Chancellor doesn’t seem to realise is the profound effect that it is having on the rest of the market.”

Rory O’Neill, Head of Residential at Carter Jonas, comments:

“A reduction in Stamp Duty is the final catalyst the property market needs to boost transactions, yet the Chancellor has again missed an opportunity to make the necessary reforms with the Spring Budget.

“Current Stamp Duty rates are stifling the top end of the market, which was of course the intention, but it is worth considering that multimillion pound properties do not operate in isolation. If they are not selling, there will be – and in part already is - a ripple effect that reduces the availability of entry level properties, precluding first and second time buyers from embarking on their journey up the ladder.

“This is even more pronounced in London with its accidental property millionaires, who frequently have to pay £200,000 to upsize from a three-bed to a four-bed home, but who lack the cashflow to absorb SDLT fees, creating a perceptible slowdown in volume of transactions.

“As it stands, Stamp Duty is prohibitively high. A £1,500,000 purchase commands over £93,000 in SDLT charges, and it is the only negative stalling the market - even the attractiveness of the Pound to Dollar based buyers, affordable borrowing and pent up demand cannot counterbalance the weight of transactional costs on homeowners.

“With vendor reluctance to adjust asking prices and an emerging reliance on overseas money to inject liquidity into the market, we are willingly cultivating a precarious residential property market.

“Which leads us to question why our new Chancellor, who reportedly made his fortune through property, has bypassed yet another opportunity in the Budget to revise Stamp Duty thresholds – both on properties priced over £937,000 and on buy-to-let investments.

“George Osborne attacked the residential market two and a half years’ ago with stringent SDLT reforms and, after two missed opportunities, our optimism is dwindling that Philip Hammond will ever work to create a more favourable environment for residential real estate.”

David Hannah, Principal Consultant, Cornerstone Tax, response to today’s Spring Statement:

“The Chancellor has once again failed to reverse the detrimental impact his imposing property tax regime is having on households up and down and the country. With real estate representing 21 per cent of the UK economy, it is a mystery as to why the Government persists in hindering a crucial sector, by creating an unnecessary burden on tenants, landlords and homeowners. 

“The ‘double blow’ effect wiping out the buy-to-let economy, namely the restricted mortgage interest relief for landlords from April 2017 to the Basic Rate of income tax (20%), and the 3 percent SDLT surcharge on additional properties, certainly doesn’t chime with the current socio-economic needs of the UK.

“The demand for rental accommodation is set to rise by one million households in the next five years - a combination of restricted access to mortgage finance, unaffordability created through eyewatering SDLT rates, and a shift in labour market trends towards a more mobile workforce. Yet the Government continues to breakdown the very sector that has absorbed change and provided homes for those who simply either cannot afford or do not wish to commit to homeownership. With the sector currently in its fourth consecutive quarter of decline, paired with a fall in homeownership rates, we are fast approaching a new type of housing crisis.

“I would urge the Government to stop their obsession with homeownership and think carefully about what our country really needs – an accessible, flexible and affordable housing supply.  The private rental sector, where buy-to-let landlords are a major contributor, provides just that.

“As for future challenges, the growing popularity of zero hour contracts where it is near impossible to obtain a mortgage, will impose further pressure on the rental market. Interestingly as the UK Government is the widest user of these contracts, it remains to be seen where they anticipate our public-sector workers will be able to live.”

 

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