Had he reverted to £125,000 rather than extending the rebate period he would simply have set back any recovery in the housing market by at least six to nine months as first-time buyers who had finally raised the necessary 10% deposit for a purchase were set back by another 1% cost at the moment of completion. If the housing market is to start turning the corner towards recovery in H2 2009 then the stamp duty rebate will need to remain in place until property prices were firmly established as an inflationary concern perhaps in H2 2010.
Elsewhere he finally agreed to back the Frost recommendations in relation to the provision of a gov’t guarantee on new mortgage backed securities issues. This is welcome and probably doesn’t cost much (on the assumption that new MBS assets should be well written with low LTV covenants in the current market) but could start to free up MBS sales. This will take time to feed through as lenders assemble loan pools of newly originated assets; the mortgage industry may well take heart from this measure and increase origination activity sooner rather than later.
The chancellor’s promise to commit £500m to the housing industry to help the industry create thousands of new homes is a drop in the ocean and well short of the £1Bn that had been hinted a few days ago. By targeting the funding at the infrastructure behind developments the benefit may just about stretch to his suggested figure of 10,000 homes but this is in a year where the number of purchase transactions is expected to be in the range 800,000 to 900,000.
There are no changes that will impact residential property investors or commercial property owners on the property front but we are all faced with some impressive hikes in both direct and indirect taxation from April 2010 so plans for an early retirement may have to be shelved for a while.