Cash Buyers On The Lookout
A Cautious Statement
The new chancellor tones down the drama in his first autumn statement.
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As recent Budgets and Autumn Statements go, Philip Hammond’s first one was a little, well, boring. But that’s how the government’s fiscal planning should be. Rabbits out of hats might be entertaining to watch, but they are generally not great for business and tax planning.
The new Chancellor’s other departure was to reduce the emphasis on austerity. He hasn’t gone overboard, but committing funds to research and development and investment in infrastructure is a welcome relief, achieved by relaxing the timescale of reducing the government deficit.
There isn’t a huge amount to spend, but some of it goes into providing new housing: £1.4bn for affordable homes and £2.3bn by 2020-21 for infrastructure to help local authorities “unlock new private housebuilding in the areas where housing need is greatest”. He hopes this will get 100,000 homes built.
That’s all great stuff, but there was also a reminder that it’s not going to be easy, even with less austerity. The Office for Budget Responsibility’s forecasts show that inflation is expected to pick up quite sharply in 2017 due to the impact of the fall in sterling. The impact of that is to significantly affect real earnings growth, which means that even though austerity is less severe, households will still feel the pinch.
One thing that may give some relief though is the expectation that interest rates will fall and remain below 0.5 per cent until the end of 2019. That’s good news for homebuyers, particularly first time buyers, who want or need to move home. That combined with the Governor of the Bank of England’s commitment to ensure that credit remains available to homebuyers and businesses should help to promote much needed liquidity in the housing market.
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