As expected, plans to help the housing market and first-time buyers in particular, were included in Chancellor Philip Hammond’s Budget. What were these policies, and how could they affect the property market? We discuss the inaugural autumn budget in this blog.
What has happened since the last Budget?
Firstly, let’s quickly summarise what has happened in the last 9 months. The UK has triggered Brexit and begun negotiations on the terms of its departure from the EU. Borrowing levels are at a 10-year low, but inflation has risen to 3% while growth has faltered a little. Confidence in UK housing has fallen to a 5 year low according to a Halifax survey last month. The debate on how much any of this can be attributed to Brexit continues.
What was in the Budget 2017?
Stamp duty is abolished for the first time buyers on properties up to £300,000 from today, benefiting 95% of first-time buyers who pay stamp duty. First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000 but will pay the normal rates of stamp duty on the price above that (Saving £1,660 on the average first-time buyer property).
80% of people buying their first home will pay no stamp duty but it’s worth bearing in mind that there will be no relief for those buying properties over £500,000.
300,000 additional homes will be built in England each year by mid-2020s. £15.3 billion new financial support for house building over the next five years – taking the total to at least £44 billion. This includes £1.2 billion for the government to buy land to build more homes, and £2.7 billion for infrastructure that will support housing.
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Changes to the planning system will encourage better use of land in cities and towns, meaning more homes can be built while protecting the green belt.
How will the Budget affect the property market?
The Office for Budget Responsibility forecasts that the big winners of stamp duty changes are not 1st time buyers but in fact sellers, as the policy will put up prices by 0.3% in 2018. House prices could build up as more people can afford houses, while supply stays the same. The additional homes would increase this demand, but it will take time for these homes to be built to meet demand therefore lower house prices.
Why is the budget today?
Today’s Budget was the first to be delivered in November since 1996. Mr Hammond believes late autumn is a more suitable time for tax and spending changes to be announced before the start of the tax year in April. So from this point on, Budgets will take place in November rather than in spring.
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