What the budget means for the property market
October saw Philip Hammond’s last Budget before the UK leaves the EU. While housing was most definitely on the agenda, what the chancellor presented consisted of tweaks rather than ground-breaking policy measures. Here is a summary of what was announced:
Help to buy
Help to buy – a government backed equity loan scheme whereby buyers can borrow up to 95% of a new homes value with a government-backed loan of up to 20% (40% in London) – has been extended by two years. Now scheduled to come to an end in 2023, the chancellor also announced that Help to Buy would no longer be available to non-first time buyers.
At the same time, he announced Help to Buy regional price caps, which will come into effect from 2021. Presently, anyone buying under the scheme is subject to a price cap of £600,000 regardless of where they live in England and Wales. But from 2021 it’s all set to change. The government are setting caps at a local level, which means that buyers will be restricted to a maximum of 1.5 times the current forecasted average first-time buyer house value in each region. A maximum of £600,000 will remain in London.
Since the last Budget in November 2017, first-time buyers have been exempt from stamp duty on properties up to £500,000, with full relief on the first £300,000. Almost a year on and the chancellor announced that this is to be extended to first-time buyers of shared-ownership homes. Backdated to last year’s November Budget, this will help any first-time buyer purchasing - or who has purchased - a shared-ownership property within the price bracket.
Published alongside the Budget there was further reference to an additional stamp duty tax of 1% on foreign buyers. Initially mentioned by Theresa May at the Conservative Party Conference, this remains a proposed measure, subject to a consultation scheduled for the New Year. Certainly, a proposal to watch out for.
The Budget brought about more tinkering of taxation for landlords, when Philip Hammond announced changes to Lettings Relief and Capital Gains Tax. Currently landlords who let out a former home are able to claim two different types of tax relief - Private Residence Tax and Lettings Relief - which help to reduce their capital gain.
Under the terms of Private Residence Tax Relief owners currently get full tax relief on the years they lived in their home, and for the last 18 months of ownership regardless of whether or not they lived there. From April 2020, the government is reducing the tax relief on those 18 months down to nine. Changes to lettings relief mean that from April 2020 the government will only allow this tax break to homes where the owner lives with their tenant.
This legislation will hit accidental landlords – those forced to rent out their property when they’re not able to sell – particularly hard. And these make up a sizeable proportion of landlords. Our analysis shows that in London alone some 12.5% of homes available to rent had previously been up for sale last year.
Retail to Residential
In an effort to help transform our declining town centres, the chancellor announced a £675 million Future High Streets Fund. The fund will finance a task force to draw up long-term strategies aimed at turning around high streets including the redevelopment of underused retail and commercial areas into residential.
To meet the Prime Minister’s promise of ‘fixing the broken housing market’, the chancellor reiterated that the government will lift the cap on the amount local councils and housing associations can borrow to fund the building of social housing.