Mortgage industry reacts to Budget 2018

Yesterday, chancellor Philip Hammond delivered the final Budget before the UK plans to exit the EU.

Amid the claims to an “end to austerity” and tax relief for small businesses there was a handful of housing-focused announcements, which consisted of an additional £500m to the housing infrastructure fund (among other building initiatives), the removal of stamp duty for shared ownership first-time buyers, the tightening of private residence relief rules, and an end date to the Help to Buy scheme – March 2023.

Overall, the industry wasn’t overly enthusiastic about the announcements. Just Mortgages and Spicerhaart group operations director John Phillips says: “The housing crisis appears to be less critical to the treasury than all the people we know are looking to buy or sell a property.

“Instead of listening to the industry the government appears to believe that the health of the housing market will come solely from FTBs. This blinkered view will do nothing to get the whole market moving, which is vital in the long-term.”

North London estate agent Jeremy Leaf comments: “The most disappointing aspect of this Budget is that nothing has been done to improve low transaction levels, which is not just bad for the property market but even worse for the wider economy. Given the rapid expansion of the private rented sector over the past few years, more support to generation rent would also have been welcome, such as sales of rental property to long-term tenants.

Meanwhile, Hope Capital chief executive Jonathan Sealey says: “The chancellor talked a lot but said very little, with less than most people wanted to boost the housing market, despite Theresa May repeatedly saying this is a priority for her government.”

Intrinsic mortgage network managing director Gemma Harle adds: “Those hoping that the Budget was going to make sweeping announcements about changes to housing will be disappointed.”

Audley Group chief executive Nick Sanderson comments:”£500m more for building new homes, but yet again the focus is on FTBs. The houses are already there to buy, if only the many older people who want to downsize into more suitable homes could do so. But they can’t. Because this government is still not putting enough of a focus on specialist housing for older people that could facilitate this movement and free up the housing market for those first time buyers.”

PRIMIS and PTFS chief operating officer Toni Smith brings up the absence of buy-to-let announcements: “It will undoubtedly be a relief for many landlords that the chancellor has moved his focus away from the BTL market in this Budget – a sector which is still getting its head around recent regulatory updates. This decision will hopefully afford landlords the time they need to take stock of their positions, and work to consolidate, or potentially grow, their portfolios.”

On future plans for Help to Buy

A spokesperson for the Home Builders Federation comments: “We are very pleased that the government has recognised the positive impact the scheme has had on helping boost supply.

As such, we welcome the extension until 2023 and the additional funding the government is making available and the certainty the announcement provides.”

Harle adds: “Some will see the government’s extension of the HTB scheme by two years until 2023 as a positive. However, there will be lots of people unhappy it has not been scrapped. The scheme has had mixed reviews, with some accusing it of simply serving to massively inflate housebuilder share prices alongside the unintended consequence that some FTBs have been left as mortgage prisoners.”

Budget documents also reveal that regionally-set price caps will also be introduced to the scheme within its two-year extension. HBF comments: “We need to understand the impact the new restrictions could have on scheme sales in different locations and look forward to working with the lenders to ensure sufficient affordable high loan to value mortgage products are in place for the scheme’s planned end date.”

Legal & General Mortgage Club director Kevin Roberts is upbeat: “Today’s extension of the HTB scheme to 2023 has provided much-needed clarity over the scheme. Not only do housebuilders now have more certainty for longer-term planning and building the thousands of new homes our country so desperately needs, but it also gives potential buyers who are saving for a deposit the peace of mind that they too can benefit from the scheme over the coming years.”

On the boost to the infrastructure fund

Spicerhaart Part Exchange and Assisted Move business development director Neil Knight says that the treasury’s plans don’t far enough: “We welcome the chancellor’s announcement of a further £500m for the housing infrastructure fund… and news that he will empower up to 500 neighbourhoods to buy land for housing for sale to local people in perpetuity.

“However, these were the only major announcements in terms of housing, and we would have liked to have seen more measures announced considering what a hot political topic housing is.”

Hammond also promised a government response to Sir Oliver Letwin’s report on house building, published earlier in the day, which claims that housebuilders do not engage in landbanking.

“We had hoped that the chancellor might have announced plans to speed up the build-out permission process, following the publication of Sir Oliver Letwin’s report earlier today,” adds Knight, “which would go a long way to help government reach its targets, but there was no such announcement today.”

The HBF spokesperson says: “We welcome the recognition in the report by Sir Oliver Letwin, acknowledged by the chancellor in his Budget speech that housebuilders do not land bank.

“This supports the findings of numerous previous such reports. We look forward to working with government on how the other recommendations made in the report can help increase housing output further.”

Thistle Finance managing director Mark Dyason struck a more cynical tone: “The question, as ever, is whether the government will simply talk the talk or actually walk the walk.

“Over the years plenty of initiatives to get Britain building have been proclaimed with great fanfare and not one has made a material impact on the number of new homes being built.

“The problem is the revolving door at the housing ministry spins faster than any other government department… there’s zero consistency, often zero ministerial understanding of the property market itself and, to top it all off, never enough time to stick to a coherent game plan.

“What many in the property industry would like to see for the benefit of new build is a cross-party working group with a remit that extends beyond the parliamentary cycle and individual budgets.”

On the eradication of stamp duty for those in shared ownership

Trussle chief executive Ishaan Malhi comments: “The purpose of the shared ownership scheme is to give those of more restricted financial means a route to owning their own home, so it’s only right that the people using it receive the same stamp duty boost as other FTBs.

“When the chancellor introduced the policy last year it split opinion, with some believing that this would lead to higher house prices. This doesn’t appear to have happened and it’s difficult to argue with the numbers, with more than 121,000 people benefitting so far.

“The government’s decision to increase the threshold… will also make a huge difference to first-time buyers in the most expensive parts of the UK, like London, where the average house price is just shy of this total.”

However, some came to a different conclusion. SunLife non-life products detector Simon Stanney is one such person: “Almost a quarter of pensioners are more likely to downsize if they are exempt from stamp duty, according to YouGov.

“But, despite calls to cut stamp duty for pensioners, the chancellor has decided not to put any measures in place to make it easier and cheaper for older people to move and I think we will see a spike in equity release as a result.”

Harle adds: “This is a well-meaning change but will have very little impact as few FTBs purchase property above £300,000, even with a shared equity. Therefore, this change will not go to the root of the problem, which is that there are simply not enough transactions being done further up the ladder. While we need to do more for FTBs, we should also look to those looking to move for the second or third time to free up more housing stock.”

On the tightening of private residence relief rules

H W Fisher & Company private client partner Tim Walford-Fitzgerald comments: “Principal private residence relief allows a grace period of up to 18 months for sales of a main home if you move into a new property while retaining tax exemption. That’s now been halved to nine months at a time when many are experiencing stagnation in the property market, particularly at the higher end of the market.

“It’s unlikely that the owners of such properties will thank the chancellor for this but at the same time by pushing the change back to April 2020, he can say that he is giving most home owners a realistic chance to sell their home in time.

“In effect, the change stops the practice of renting the home out for twelve months and still achieving a tax-free gain on the sale of the property.”

Furthermore, the Budget documents reveal that the proposed surcharge for foreign-based property buyers, previously suggested as being between 1 per cent and 3 per cent, will be consulted on at 1 per cent. On this subject, Prime Purchase managing director Charlie Wells says: “Before the Budget, we all feared the government would have yet another go at ‘top end’ of the property market, which it perceives to be dominated by foreign buyers.

“On the one hand, the government claims to champion social mobility and diversity but on the other, it is saying that if you are foreign you are not welcome. There is no logic to it. If this government thinks that penalising the people at the top, particularly foreigners, will revitalise the economy and get things going, then it is very wrong.

“It is hard enough trying to sell a property in this market and any community which has had the fortunate experience of a foreign or UK-based buyer purchasing a large house in their area will have benefited from the spin-off prosperity this brings countless people.”

“It’s time to stop trying to tinker with the property market. The government should put its arm around the industry and realise it’s one of the cornerstones that makes the UK a place where many people want to live, wherever they originally come from.”

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