Following Chancellor Philip Hammond’s Spring Statement 2018 yesterday, property insiders have offered their thoughts on the announcement.
The Chancellor unveiled upgraded projections for growth, and predicted falling inflation, debt and borrowing in his Spring Statement 2018.
He claimed that the UK economy had reached a turning point and there was “light at the end of the tunnel”. He also ruled out an immediate end to austerity, but hinted at possible spending rises in the future.
The Labour Party accused Hammond of “astounding complacency” in the face of the worst ever public sector funding crisis.
The Chancellor told the House of Commons in his 26-minute statement that growth was forecast at 1.4% this year – 0.1% higher than predicted by the Office for Budget Responsibility in November, with the expectation for 2019 and 2020 unchanged, at 1.3%.
In this year’s Spring Statement, Hammond also said that debt would fall as a share of GDP from 2018-19, which would be the start of “the first sustained fall in debt for 17 years, a turning point in the nation’s recovery from the financial crisis of a decade ago”.
The Chancellor resisted calls from Labour and some Conservatives to use the extra cash from an unexpected boost in tax receipts to ease the spending squeeze.
However, he hinted at possible spending increases to come, in his Autumn Budget, when he will “set an overall path for public spending for 2020 and beyond”, with a detailed spending review in 2019.
Hammond also unveiled a series of consultations on future policies:
- A reduction in tax for the least polluting vans, to “help the great British white van driver go green”
- A possible tax on single use plastic
- A new VAT collection mechanism for online sales, to ensure that the VAT that consumers pay “actually reaches the Treasury”
- How online platforms can help their users to pay the right amount of tax
- A call for evidence “on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas”
- Inviting cities across England to bid for a share of £840m to deliver on “local transport priorities”
- A plan to make the least productive businesses learn from the most productive
- Measures to end late payments for firms
- The future of cash and digital payments
In a break with recent tradition, the Chancellor did not use the Spring Statement 2018 to present a mini-Budget or pre-Budget report.
However, Hammond did announce that London would receive an additional £1.7 billion to deliver 26,000 affordable homes, including properties for social rent, taking the total number to more than 116,000 by the end of 2021/22.
Property Insiders React to Chancellor’s Spring Statement 2018
In response to different aspects of the Spring Statement 2018, we have various comments from property insiders.
Neil Cobbold, the Chief Operating Officer of PayProp in the UK, responds to the lack of housing issues/funding raised by Hammond: “Due to the shift to annual Treasury reporting, the Spring Statement was not as in-depth or wide-ranging as an annual Budget. That said, relatively few housing measures and spending plans made it into the Chancellor’s statement.
“The Government has consistently promoted its commitment to fixing the UK’s broken housing market, so we expected more updates to this effect.
“Some of the housing measures yet to be addressed or finalised include the ban on letting agent fees, the proposed extension to mandatory HMO landlord licensing and additional regulation of the private rental sector.”
On the Government’s continued efforts to fix the broken housing market, Cobbold gives his thoughts: “The Government is clearly committed to addressing the UK’s ongoing housing problems. Increasing the supply of available homes to buy is a key strategy and one that could have obvious positive outcomes in the future.
“However, one issue that is potentially being overlooked is affordable housing in the private rental sector. Private tenants now account for a fifth of all households and the latest annual English Housing Survey shows that renting is now the largest housing tenure in London.
“It could, therefore, be beneficial to move away from the notion that everyone wants to buy a home, embrace the rental revolution and work out how to provide more high-quality, affordable rental housing.”
He also looks at the recent Stamp Duty reforms for first time buyers: “The Chancellor revealed that the Stamp Duty cut for first time buyers announced in November’s Budget has benefitted over 60,000 property purchasers.
“Moving forward, what could be valuable is a Government investigation into the 3% Stamp Duty surcharge on additional homes and how it has affected the rental market during the two years it has been in operation.”
Finally, Cobbold addresses the forthcoming ban on letting agent fees: “The ban on fees has been hanging over the industry for almost 18 months and it would benefit all parties involved in the private rental sector to have a solid date to work towards.
“For the majority of agents, plans to mitigate the effect of the ban will already be in place, and now is the time to put these plans into action and make sure your business is ready to adapt to this huge market change.
“Agents need to ensure they are exploring ways to streamline their processes, generate additional revenue and improve their landlord proposition.”
Nimesh Shah, a Partner at accounting, tax and advisory practice Blick Rothenberg, reacts to the Stamp Duty claims in the Spring Statement 2018: “The Chancellor claimed during the Spring Statement that 60,000 individuals have benefited from the first time buyer relief. The first time buyer relief is worth up to £5,000 saving in Stamp Duty Land Tax. Based on the Chancellor’s claim, the first time buyer relief has cost the Treasury up to £300m in just under four months since its introduction. At the current run-rate, it will cost the Treasury close to £1 billion in the first year.
“At the Autumn Budget, the Treasury estimated the 2017/18 cost to be £125m, and by 2022/23, £670m. Today’s claim by the Chancellor that 60,000 first time buyers have already benefitted suggests that the Government’s original figures were significantly under-estimated.”
Russell Quirk, the Founder and CEO of hybrid estate agent Emoov.co.uk, has his opinions: “Reaffirming from the Chancellor yet again covering the hot topic of housing, but we still haven’t seen the delivery of promises from previous Budgets, so only time will tell if these words will actually equate to action. If it does come to fruition, his pledge of 300,000 homes a year will go some way in addressing the UK’s housing crisis.
“Today’s additional announcement of 215,000 homes within the West Midlands region by 2031 will see an already strong area of the UK property market further accelerate where price growth is concerned. Despite uncertainty plaguing the current property landscape, these more affordable regions have seen a sustained level of buyer demand, and so this increased investment into the local property market should only see this continue.
“In contrast, London has been one of the worst hit in terms of a dwindling appetite for property amongst buyers. While the commitment of 26,000 affordable homes in the capital and a total of 116,000 affordable homes by 2022 would be a step in the right direction, the Government delivered just under 7,000 affordable homes in 2017. So, there is quite a large gap between their good intentions and reality, and this is simply not adequate enough to fix London’s broken housing market.”
Finally, Shaun Church, the Director of mortgage broker Private Finance, comments: “The cut to Stamp Duty is helping to ease the climb onto the property ladder for thousands of first time buyers. Mortgage lenders are also ramping up their product offering for new buyers in a bid to beat the competition and win first time buyer business – resulting in low rates and favourable lending conditions for those looking to get their first mortgage.
“Existing homeowners, however, have been left out in the cold. With no sign of Stamp Duty reform for those further up the ladder, the prohibitively high cost of moving is continuing to dampen activity at the upper end of the property market. While this might not seem like a problem for ordinary buyers, a healthy market requires plenty of movement at all rungs of the ladder. A blockage at the top will have a trickle-down effect, as those who want to upsize may struggle to find any properties available, which will in turn impact those further down the chain.”