Finance News

Housing Industry Reacts to Yesterday’s Budget Announcement

Rose Jinks - November 23, 2017
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Yesterday, the Chancellor, Philip Hammond, finally addressed some of the greatest issues facing the property market in his Budget announcement. The housing industry has reacted to the news…

The Chancellor finally acknowledged how the new Universal Credit system is pushing claimants into long-term debt. He pledged to cut the wait for the initial payment by a week (to five), as well as remove the seven-day waiting period so that entitlement for Universal Credit starts on the day of the claim. Households requiring an advance will also be able to access a full month’s payment within five days of applying. The repayment period of these advances will be extended from six to 12 months.

Paul Shamplina, the Founder of Landlord Action, responds to the changes: “The Government appears to have bowed to the volume of criticism levelled at its flagship Universal Credit scheme and a realisation there is a range of fundamental issues which need to be urgently addressed. Mounting evidence pointed to the fact significant hardship was being experienced by claimants due to, amongst other things, having to wait up to six weeks before the first payment.

“Changes announced yesterday by the Chancellor included removing the seven-day waiting period before eligibility commences; access to a full months’ advance (loan), instead of current 50%, payable within five days of applying; extending the repayment period for advances from six to 12 months will undoubtedly help ease concerns. The Chancellor also announced that new housing benefit claimants could continue to receive it for an extra two weeks while waiting for their Universal Credit payments to start. This news will be warmly welcomed by tenants and landlords alike, and should help reduce rent arrears at the point of transfer to Universal Credit.

“However, I do still have a number of concerns. The reduction in the waiting period by seven days doesn’t apply to the vast majority of claimants anyway, so this will only help the minority. Of greater issue is the increasing complexity of the scheme; staff assessing Universal Credit claims have not been properly trained, meaning mistakes are being made on an all too regular basis; and, as the full service rollout expands, more complicated cases will arise, causing even more challenges for DWP [Department of Work and Pensions] staff. Some experienced commentators have suggested the changes, whilst welcomed, represent ‘sticking a plaster’ to a fatally flawed system, which requires re-engineering, rather than tinkering, and have grave doubts concerning DWP’s ability and willingness to alter the direction of travel. Until the system has proved itself fit for purpose, landlords will remain cautious about renting to those in receipt of Universal Credit, for fear of unsustainable levels of rent arrears.”

To help free up the many homes that are being left empty across the country, Hammond announced plans to legislate for councils to be allowed to impose a 100% premium on properties left vacant – this doubles the current 50% cap.

Housing Industry Reacts to Yesterday's Budget Announcement

Housing Industry Reacts to Yesterday’s Budget Announcement

Although the Government has so far failed to deliver on its ambitious housebuilding pledges, the Chancellor announced a commitment of £44 billion for housing over the next five years. By the mid-2020s, he said that 300,000 new homes should be being built every year – the highest level since the 1970s.

The Co-Founder and CEO of LendInvest, Christian Faes, is pleased with the pledge: “Philip Hammond has shown that this is a Government that’s finally ready to intervene in the property market, and this will be welcomed by industry. Now they must leverage the capacity of lenders in the market to get funds out to those that need it and can get Britain building, finally.”

However, the COO of PayProp in the UK, Neil Cobbold, is cautious of the Chancellor’s promises: “Fixing the housing market has become a stock phrase for the current administration and, therefore, an announcement committing to more homes as part of the Budget comes as no real surprise.

“If achieved, these figures would represent a step in the right direction. However, for too long, housebuilding targets have not been met as the supply crisis has worsened.

“We’d be interested to know if the Government has plans to help increase the stock of private rental homes as the demand for these properties continues to rise. At this point, we would also like to see an update from the Government on its Build to Rent project and the progress made so far.”

Richard Tugwell, a Director at specialist lender Together, adds: “The pledge to build 300,000 new homes a year has to be a positive move towards fixing issues in the housing market, which have existed for decades. But it’s essential that finance is available for developers to deliver on this promise. Those with an interest in the property sector, including lenders like Together, need to all work alongside the Government to ensure property developers and investors have access to funding, to help ensure these ambitious targets are met.”

At the same time, Hammond has appointed Oliver Letwin to chair a review of how land is being use for housing. It will report by spring 2018, in time for the next financial statement. If necessary, Hammond confirmed that the Government will take powers to intervene to ensure that land is used for housing.

Probably the most significant announcement in yesterday’s Budget, however, was that Stamp Duty will be abolished for first time buyers purchasing homes worth up to £300,000. Those buying homes up to £500,000 will not have to pay Stamp Duty on the first £300,000 – this is to help young buyers in markets like London, Hammond added.

Lea Karasavvas, the Managing Director of Prolific Mortgage Finance, isn’t happy with the Stamp Duty cut: “Primary school children have taken a Stamp Duty bullet so millennials can get on the housing ladder. It is uncharacteristic of the Chancellor to kick the can down the road like this, given how much he has stressed in the past the importance of not saddling future generations with the cost of solving society’s current problems.

“The whole point of the housing crisis is that demand is too high relative to supply. Fiddling with the economic stopcock by effectively handing out free money only exacerbates the problem and won’t help buyers, brokers, lenders or sellers in the long run.

“Businesses and markets function best when they’re not caught in a boom-and-bust cycle, and that’s what we’re all stuck with.”

The Founder of housebuilding investment platform Homegrown, Anthony Rushworth, is also displeased: “There are plenty of reasons for first time buyers to be jumping for joy on the face of it, but, in reality, they only pay Stamp Duty of £1,500 on average.

“Sparing them from this tax might not cause the Exchequer any loss of sleep, but all this will likely do is feed into higher prices for the narrow band of properties they are fighting over.

“This is the problem with strategies that boost demand without addressing the fact there are too few homes being sought by too many buyers.”

Nevertheless, Hannah Maundrell, the Editor in Chief of money.co.uk, is more positive: “Great news for anyone buying their first home, as Stamp Duty gets abolished for first time buyers from today. This will make getting on the property ladder slightly more affordable for anyone buying a home worth up to £300,000, or up to £500,000 in high cost areas, as there will be no Stamp Duty to pay on the first £300,000. What it won’t do is solve the affordability gap between property prices and wages that many wannabe homeowners face – this is the bigger challenge the Chancellor has tried to break the back of with his announcements on boosts for the home building sector.”

Jeff Knight, the Director of Marketing at Foundation Home Loans, explains how the Stamp Duty change will affect landlords: “Of all the announcements to be pulled out of the red box this time round, the abolishment of Stamp Duty for first time buyers was one of the most highly anticipated. Now confirmed, it will certainly inject some more momentum into the purchase market and give those starting out a leg-up in the face of increasing house prices. However, maintaining the current rate of Stamp Duty for landlords will naturally cause them to batten down the hatches and protect their income. A quarter of landlords said they would increase rents next year if there was no change in this policy – unsurprising given the raft of changes to buy-to-let.

“In reality, the commitment to building more homes and addressing planning regulation is what we needed to address the supply and demand imbalance, but affordable homes do not have to equal ownership, and there should also be a focus on developing good quality, affordable homes that can be rented. Doing this will not only support tenants while they save for a deposit, but will further open up private rental sector to the more motivated, professional landlords who can inject fresh energy and ideas into the market.”

Overall, Mark Hayward, the Chief Executive of NAEA Propertymark (the National Association of Estate Agents), believes the cut will boost the market: “The announcement today from the Government to abolish Stamp Duty for first time buyers will have a positive impact on the market. It’s a smart move to ensure the dream of homeownership for young people can become a reality, and will help buyers across the UK, including London and the South East, where property prices are higher.

“We do, however, need to realise that this move will increase the demand for first time buyer properties and, if we don’t have the supply, it will push prices up. We have seen this in areas where Help to Buy is offered, as it attracts a great deal of interest from first time buyers.

“In terms of the Government’s plans to build 300,000 new homes a year, it is yet another pledge to increase the number of new homes created. While we welcome this news, we have historically had these announcements from Government to accelerate housebuilding, which have not been delivered. It is not a question of how many, it’s a question of how.”

However, the Director of mortgage broker Private Finance, Shaun Church, claims that the controversial tax will continue to glue up the market: “The Government has finally recognised the detrimental effect the current Stamp Duty system has on the UK housing market. Today’s announcement will be welcomed by aspiring first time buyers across the UK, helping the dream of homeownership become just that little bit more affordable.

“The Stamp Duty holiday will be a temporary shot in the arm to the housing market, which has slowed to a sluggish pace this year. Although first time buyers in the capital will be disappointed to be denied the full exemption enjoyed by the majority of the UK, relief on the first £300,000 will no doubt offer some much needed assistance.

First time buyers were a particular focus

First time buyers were a particular focus

“However, with no mention of reform for those further up the ladder, Stamp Duty will continue to glue up the market, dis-incentivising homeowners as they instead choose to improve, not move. This lack of fluidity can only damage first time buyers’ prospects in the long-term, as a lack of second steppers or downsizers constrict an already limited property supply, driving house prices upwards.

“First time buyers have cause for celebration today, but the dust will soon settle and they will recognise that, in spite of their new tax holiday, house prices continue to rise and the struggle to afford a deposit still exists. We can only hope that the Government’s target of an additional 300,000 net homes per year and proposed planning reform will help improve property supply and remedy unaffordable prices.

“One of the very few areas of the housing market working in first time buyers’ favour is mortgage rates, which remain incredibly low despite the recent interest rate rise. First time buyers galvanised by today’s Stamp Duty announcement must take advantage of this by seeking independent advice to source the best possible deal on their mortgage.”

Cobbold is also worried that the move is just another headline-grabbing stint from the Government: “The Stamp Duty cut will grab many headlines, but leaves most of us in the industry wondering whether it solves any of the major problems the UK housing market is currently facing.

“Incentivising first time buyers further is no bad thing, but the fact remains that it is the limited number of homes available which is pushing up house prices and, ultimately, stopping people from getting on the property ladder.

“It has become clear over the last few years that the Government recognises the growth of the private rented sector as an alternative housing tenure.

“For this reason, it could be more beneficial to focus on downsizing and planning laws to help free up much-needed stock for both owner-occupiers and private renters, rather than trying to help the younger generations buy property when it’s clear that many are happy to rent for longer.”

He also reacts to the lack of details on further private rental sector regulation: “With no further details announced as part of today’s Budget as promised, we wait to hear more about the Government’s plans alongside the outcomes of several outstanding consultations.

“When it comes to increased professionalisation of the rental sector, the vast majority of letting agents will welcome the Government’s pro-regulation stance.

“As we’ve said before, the Government’s continued focus on the private rental sector emphasises its growing importance. And, therefore, anything that contributes towards increased transparency should be welcomed by the industry.”

The Managing Director of StudentTenant.com, Danielle Cullen, was also hoping for more support of the private rental sector: “Yet more crippling announcements by the Chancellor for private landlords – with the introduction of 100% Council Tax now for all empty properties. Landlords have been completely paralysed by Conservative announcements recently, with the UK moving down ten places in the list of best European countries to invest in buy-to-let property in recent months.

“We’re also still no more informed on the tenant lettings fee ban, which is also set to increase rental costs for landlords, as many agents have outlined they will have to pass over the costs.

“I really must stress though, that, where possible, landlords should not be discouraged from investing, or continuing to rent their properties in the UK. Parliamentary changes are reducing yields, but savings can be made elsewhere to maintain them.

“Technology was a huge focus in Hammond’s Autumn Budget today, where he described the UK as ‘on the brink of a technological revolution’. Landlords must be utilising new technologically advanced platforms to reduce costs. Prop-tech is a massively growing industry, and landlords need to become accustomed to using technology to make the lettings process more efficient and cost-effective.”

Russell Quirk, the Founder and CEO of eMoov.co.uk, gives his thoughts on the Budget announcement: “Today’s Budget has amounted to little more than the annual dose of rhetoric and empty announcements of bold plans, extolling a robust intent to build more housing.

“The Treasury’s pledge to build more homes is a story we’ve been told many times before, but these well-worn, heady platitudes have not been fulfilled since way, way back in 1969, when the Beatles were topping the charts.

“The likelihood of hitting the ambitious target of one million homes by 2050 is slim to say the least, and one that is unlikely to be hit. The urgent review of the gap in planning permission and the actual building of houses is also far too little too late, and should have been implemented many budgets ago.

“The Government must actually execute on a housing plan if the current housing crisis is to be remedied and not just grab headlines with their unqualified so-called intentions. This problem is not just about money. It’s about action and it’s about listening to experts within the industry for once.

“A cut in Stamp Duty for first time buyers is the only real sign of good intent by Chancellor Hammond, and one that may help reignite the property market momentarily, but some may say acts as yet another diversion from the elephant in the room of a continued failure to build a meaningful number of affordable homes. Indeed a cynical electoral bribe.”

Dan Wilson Craw, the Director of tenant lobby group Generation Rent, believes that the Stamp Duty change will only benefit existing homeowners: “This measure might boost homeownership, but will do nothing to reduce the fundamental cost of housing. In areas where first time buyers are competing with investors for homes, no Stamp Duty to pay will give them more purchasing power. But, where they’re competing with each other, it just means they have more cash with which to make an offer. The real winners are people with property to sell.

“Meanwhile, for the millions of private renters for whom homeownership is a distant prospect, the Chancellor has announced a consultation on removing barriers to longer tenancies. But we have no sense of how ambitious the Government is willing to be on this, so real improvements in renting still feel a long way off.”

The Chief Executive of ARLA Propertymark (the Association of Residential Letting Agents), also comments on the plans for a longer-term tenancies consultation: “There were a number of positive announcements in relation to homes for consumers in today’s Budget. We are pleased that the Government will consult on longer-term and more secured tenancies – this feels to be in line with the holistic approach they are taking towards the rental market. We also welcome the launch of the Homelessness Reduction Taskforce, and look forward to working closely with them in the future.”

Jonathan Stephens, of Surrenden Invest, has also focused on the positive: “So, Hammond’s housing plan has been announced and, overall, there are a number of positive takeaways.

“Firstly, the abolition of Stamp Duty for first time buyers on properties up to £300,000 is of course good news, as this will enable those looking to get onto the ladder a long overdue helping hand.

“Interesting we, an investment agency, have been selling an increasing number of properties in the UK’s major cities to first time buyers over the last three to four months and, in light of this new ruling on Stamp Duty, expect to do so even more in the coming months and years.

“For our other clients, the buy-to-let investors, the worry that a Stamp Duty gift to first time buyers would be at their expense has not materialised, which will of course be a great relief.

“Secondly, and maybe the most important announcement of the day, has been the pledge of £44 billion of capital funding to boost the housing market, including a new SME housebuilding fund.

“Investment and support from the Government to encourage and enable (through access to cheaper finance) developers of all sizes to build can only be positive and this, coupled with the tightening of laws around planning permissions and the ability to hold land without development, will hopefully result in the levels of housebuilding required to be delivered.

“With this is mind, I look forward to the findings and suggested actions of the newly commissioned report next year.”

Stephen Cameron, the Pensions Director at Aegon, insists that Hammond missed an opportunity for downsizers: “The immediate abolition of Stamp Duty for first time buyers on the first £300,000 of properties up to £500,000 signals the tax breaks pendulum is swinging firmly back towards younger voters. Following on from the introduction of the Lifetime ISA, this may help accelerate when the property dream can be turned into a reality for some.

“However, before the pendulum swings too far, we should remember that the golden age of retirement recent retirees are experiencing is not predicted to last. Fewer will retire with generous final salary pensions and may find themselves property rich, but pension poorer.

“We’d like the Chancellor to go a step further and cut Stamp Duty for those downsizing or buying cheaper properties. This would have the double benefit of freeing up family homes for families, while boosting funds to pay for retirement.”

The CEO and Founder of online mortgage broker Trussle, Ishaan Malhi, is pleased for first time buyers: “It’s been a while since first time buyers have been able to take anything positive from a Budget. Yesterday, the average first time buyer would be looking at a Stamp Duty bill of between £1,500 and £2,000. Today, this charge has almost disappeared, which will have an immediate positive impact on the ability of young people to get on the property ladder. It will also reduce some of the stress associated with the journey to homeownership, which could have positive knock-on effects on the way that people manage their mortgage in the future.

“For those living in areas of the UK where property is more expensive, Stamp Duty will still be a consideration, but the hurdle is now much lower. In London, where the average first time buyer property costs around £410,000, the saving will be more than £5,000.”

John Goodall, the CEO and Co-Founder of buy-to-let specialist Landbay, notes that saving for a deposit will remain the biggest hurdle for many first time buyers: “Today’s Budget has revealed that the private rented sector will have a huge role to play in today and tomorrow’s housing market. The investigation into barriers around long-term tenancies is a welcome one; choice for tenants is key, and both short and long-term tenancies should be commonplace. Whether tenants are renting as a stepping stone on the way to homeownership or, increasingly, renting for life, they rely on the buy-to-let market to ensure rental growth doesn’t dampen their purchasing power. With the Government pulling all manner of regulatory levers in recent years, further tax changes could have been the final straw to disincentivise landlords from engaging in the market.

“The headline grabber of Stamp Duty abolition for the vast majority of first time buyers will boost market activity, but it won’t magic up millions of buyers; saving for a deposit will remain the biggest hurdle for many.”

David Smith, the Policy Director of the Residential Landlords Association (RLA), is also worried that the Budget plans will do nothing to boost the supply of housing to rent, or support families seeking longer-term homes: “With ever growing numbers of families with children in private rented housing, we recognise their needs for longer tenancies. [Yesterday’s] Budget could have acted on proposals we have made by providing tax relief for landlords prepared to offer longer tenancies, and taking action against mortgage lenders who block them being granted. Instead, we have yet another consultation adding to the 15 already ongoing which relate to the private rented sector. Tenants cannot live in consultations.

“The renewed focus on corporate money in high-rise city centre rental property also neglects rural areas and towns, and fails to support the majority of landlords who are individuals and can provide the dynamism the rental market desperately needs. The value of the private rented sector is its responsiveness and diversity, and the Budget does nothing to encourage this.”

However, he welcomes a certain Budget announcement: “We welcome the Government’s acceptance of RLA recommendations to include rent payment history in credit scores. This is good for tenants wanting to access mortgages themselves and good for landlord in better understanding the background of prospective tenants.”

Frank Nash, a Partner at accountancy firm Blick Rothenberg, says that Christmas has come early for first time buyers: “The new Stamp Duty Land Tax (SDLT) relief for first time buyers is worth up to £5,000 in cash terms for all those buying at or below £500,000. It applies to all those completing on a property on or after [yesterday]. Those who have already exchanged on a property, but which had not completed before last night, will be celebrating early today.

“Watch out joint buyers, both need to be first time buyers to qualify for the SDLT cut. If one has previously had an interest in a property, they will not be eligible. A person coming to the UK will not be eligible for the SDLT cut if they have previously owned a property anywhere in the world.”

David Whelan, the Managing Director of Link Market Services, is also cautious about the focus on Stamp Duty: “For all the tinkering around Stamp Duty levels, the real solution for the housing crisis is on the supply side. The £44 billion apparently committed to supporting housebuilding will steal the headlines, but there was significant progress in the finer details of the housing package announced. The Chancellor’s decision to lift the Housing Revenue Account (HRA) cap for those councils in high demand areas has the potential to be transformative for the provision of affordable housing. By boosting the amount they can borrow, this change will enable local authorities to press on with delivering much needed affordable homes for their residents, as well as giving the broader construction sector a welcome boost.”

  • Asa Bentley

    The interesting development in the budget was the announcement of a £2m competition to help tenants add rent to their credit history. This could ultimately benefit landlords as it encourages tenants to pay on time which can result in lower arrears.

    Interestingly, the solution already exists and at CreditLadder we are already working with landlords across the country. Please do contact us via http://www.creditladder.co.uk if you would like to discuss how we can help you have your tenants rents reported.