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Budget 2017: What are our expectations for property?

06 Mar 2017

With just a few days remaining before the Chancellor delivers his Spring Budget, there’s no doubt that there will be some challenging choices to make. Especially as the final Spring Budget looms ahead of the impending Brexit, every decision will need to be made with the link to Britain’s departure from the EU in mind.

So, what are we looking out for? Here are our three key expectations for the real estate sector.

Backing more SME builders

The Government released a housing white paper on 7th February, which outlined reforms to the housing market and boosted the supply of new homes in England. The plan is to back small and medium sized builders through the Home Building Fund, which should hopefully free up more finance and reduce the red tape surrounding new build houses. There was also an awareness that, during the recession, there was an increasing dependence on the larger housebuilders, which meant that the smaller firms were left to fall under the radar. Now that the demand for housing has grown, the Government has identified smaller housebuilders as a solution to helping the building backlog – and that is why they have chosen to hone in on these.

It would be great to see the Chancellor deliver further plans to support different parts of the market. Whether that is to support the building of more social housing, or first time buyers, perhaps even supporting the building of more properties that are designed for renting only. That way, there will be a much more diverse range of property available and help to those who need it.

Fairer for landlords

Property investors have certainly had their time in the spotlight. Former Chancellor, George Osborne, delivered the blow at last year’s Budget that second home owners would be subjected to an increased Stamp Duty Land Tax (SDLT) charge and that by 2020, all landlords would lose interest rate reliefs on their mortgages secured against buy to let property. They have also since lost their wear and tear allowances against purchases for furnishings.

The jury is still out over whether or not this new legislation will have a major impact on the property market. Whether or not the Government did the right thing by deterring landlords to let first time buyers come to market, only time will tell.

The housing white paper cites the loss of a private sector tenancy as one of the most common causes of homelessness. But, with increasing shortages of council accommodation available, private sector renting needs to be protected to ensure Britain doesn’t end up with a housing problem that is even worse.

I am sure there will be no U-turn on the SDLT policies, but there could be some other reprieve available to landlords – those who house council tenants, for example, for those who can offer temporary accommodation.

Address affordability

Whilst the rental sector is in desperate need of attention, there also needs to be more focus on homeownership.

Controversially, Britain is still a nation of owner occupiers, compared to our European counterparts, however, the numbers of young first time buyers is dwindling. According to the Office for National Statistics, there was a 31% decline in first time buyers taking out a mortgage in 2003 compared to the 1980s. When the recession hit in 2008, this decreased by a further 47%.

Whilst in more recent years the numbers have recovered, they are still nowhere near previous levels. In fact, if anything, there is a slightly downward trend. In 1991, around 67% of people between the ages of 25 and 34 were homeowners. In 2014 that had decreased by almost half to around 35% and 67% of homeowners that were aged between 25 and 34 had now become homeowners by 45-64.

True, the circumstances relating to mortgages have changed. Mortgage loans are much higher, and lenders command much higher deposits than a decade or so ago. But whilst the circumstances have changed, the Government seems to have done very little to keep up. I would like to see a few further measures introduced to encourage more first time buyers to market, whether that is lower mortgages rates or help with deposits.

We will be watching closely on the day of the Budget and will be releasing up to the minute commentary. If you have any questions relating to how the Budget may affect you, contact us to see how we can help.

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