Since the Government lost its Parliamentary majority in June, the Budget offered the Chancellor Philip Hammond a new opportunity to reset the terms of the political debate.
Housing: stamp duty, supply and more
Central to this is housing, which the Government has seen as essential to both its political and policy agenda. While housing has played a key role in the Budget formulation, this has predominantly been focused on the domestic market, looking for new ways in which to boost home ownership, particularly amongst young people, rather than focusing on overseas investors in UK property.
The most eye catching announcement was the cut in stamp duty for first time buyers. Philip Hammond said he would abolish stamp duty on homes priced up to GBP300,000. This is very much restricted to first-time owner-occupiers who reside in the UK, which, although seen as a positive move to aid younger people getting on to the first rung on the property ladder, is also seen as a potential catalyst for rises in prices by some analysts.
In full, the key announcements by the Chancellor consisted of a GBP44 billion package of measures to deliver 300,000 homes a year by the middle of the next decade – an increase from the 217,350 homes supplied in 2016-2017. The money will be spent on a range of measures including financial guarantees to support private house-building and purpose-built private rental homes, government working with private developers on new towns, and regeneration schemes and loans to support small and medium-sized building companies.
What changes will the recent Budget have on foreign investment?
This year, the Budget’s focus was most definitely on the domestic scene, meaning not much has changed for foreign investors. For residential property, investors were actually given a small level of relief – in a single measure. For investors seeking to divest assets, a delay of one year in the plans to make investors pay capital gains tax within 30 days of selling a property were announced, deferring until April 2020.
The Government is still relying on private investment to further boost a much-needed supply in housing, so we believe they will still be keen to provide a fairly advantageous regulatory environment. Along with this, the Government has focused more on the buy-to-let market and the Private Rented Sector (PRS) due to the acknowledgement that home ownership is not achievable for many. As a result, there may be some encouragement for investment, if this can significantly contribute to the aim of building at least 300,000 homes a year.
As a result, the market is expected to continue in its current state – a supply/demand imbalance which is likely to continue, gradually increasing prices, further supported by the recent changes in stamp duty.