Navigating the Housing Market: Impact of Policies and Predictions for the Spring Budget
In July 2020, the then-Chancellor Rishi Sunak initiated a temporary stamp duty relief, facilitating families in their efforts to move to larger homes or change locations. The government's Help-to-Buy scheme, despite its controversies, assisted many first-time homeowners in securing their initial property purchase.
However, the situation has been two-sided. Eliminating interest rate deductions for buy-to-let mortgages and imposing an additional three percent stamp duty on second home acquisitions have discouraged private landlords, significantly reducing rental property availability in London and escalating rental prices.
Furthermore, the lack of a comprehensive national strategy for building council houses has exacerbated the issues of homelessness and the use of temporary housing in the city.
Chancellor Jeremy Hunt is set to present what many anticipate to be his final budget statement before the upcoming general election on the following Wednesday, with "HOUSING AS A CRUCIAL FOCAL POINT."
The imminent deadline, coupled with YouGov surveys highlighting the importance of housing to voters, indicates a budget that may heavily focus on housing issues, especially since housing was notably absent from the previous autumn statement.
Housing has emerged as a central issue in the political arena.
What significant announcements can we expect from the Chancellor, and who stands to gain or lose from the spring budget's housing decisions? Anticipate the possibility of another stamp duty holiday.
The most influential housing market policy of the past decade was the stamp duty reform introduced by George Osborne in 2014, which raised taxes on larger homes in the affluent South-East, inadvertently discouraging downsizing and reducing the availability of family-sized homes. Today, with high interest rates and living costs, this represents another costly hurdle to moving.
Stamp duty relief for "second-steppers" is struggling to upscale due to less accumulated equity, while some people recommend tax incentives for those looking to downsize. First-time buyers currently benefit from a stamp duty exemption on properties costing up to £425,000, a threshold set to reduce to £250,000 in March 2025, which could be extended.
Several agencies advocate for stamp duty reform, noting the stark contrast in stamp duty-exempt properties between London and the North-East. The winners in this scenario are those looking to upsize or relocate, while future generations may see house prices climb once more.
The government's exploration of 99 percent mortgage guarantees, requiring only a one percent deposit, addresses deposit affordability but not the broader issue of mortgage affordability. This approach is unlikely to significantly stimulate demand or encourage more home construction, failing to replace the Help to Buy scheme.
Other agencies highlight the risks for borrowers, emphasizing the need for individual assessments and education on potential house price declines. Winners in this context are first-time buyers with sufficient income but lacking a deposit, while losers include those at risk of negative equity.
Michael Gove's trial of planning reforms, including simplifying extensions and prioritizing brownfield developments, has been met with scepticism, seen as reiterations of previous announcements.
A national strategy for council house construction is the only viable solution to the affordability crisis in homeownership, rentals, and temporary accommodations.
Jackie Sadek, a regeneration expert
As Jeremy Hunt prepares for the Budget, aimed at appealing to younger voters and extending beyond the traditional Conservative homeowner base, the challenge lies in balancing incentives for landlords with protections for tenants. With rental growth in London slowing but still expected to rise, the Budget may address the Renters Reform Bill and its implications for no-fault evictions.
The real challenge is increasing the supply of rental properties while also making the sector attractive to responsible landlords.
The winners and losers in this scenario will be determined by the government's ability to provide a balanced solution to the housing crisis, with significant implications for tenants, landlords, and the broader housing market in London and beyond.
