With issues from alcohol duty to growth forecasts under the microscope, the Autumn Budget included significant announcements on a diverse set of issues. Despite these concerns, attention was focused squarely on the Government’s housing proposals. Indeed, individuals and businesses alike eagerly awaited Philip Hammond’s proposals to alleviate what the latest Housing White paper referred to as ‘a broken housing market.’
In the event, the headline announcement was certainly the abolishment of stamp duty for first-time buyers on properties worth up to £300,000, or the first £300,000 of a property worth £500,000. According to the Chancellor 95% of first-time buyers who pay stamp duty will benefit, with 80% of people buying their first home paying no stamp duty.
Although previous reports indicated a tax “holiday” rather than a permanent change, Hammond concluded that a “holiday” would merely help those already in a position to purchase a home. On average, it is anticipated that the measure will save £1,660 on a first-time buyer property.
Whilst certainly encouraging, the headline policy came under some significant scrutiny, most notably from the Office for Budget Responsibility (OBR). Amongst other concerns, the organisation predicted that the main beneficiaries would be existing homeowners, rather than first-time buyers. This is because it expects all house prices to rise by 0.3% within a year as a result of the change. The OBR also estimated that it will result in only an additional 3,500 first-time buyer purchases.
However, the Chancellor staunchly defended the measure. According to Philip Hammond: "This is our plan to deliver on the pledge we have made to the next generation that the dream of home ownership will become a reality in this country once again."
The Government’s solution to the housing crisis understandably focused on sustaining home ownership. Intended to boost housing supply to an ambitious 300,000 a year, the Chancellor also unveiled a £1 billion land assembly fund, £5 billion infrastructure fund and £8 billion of guarantees for private housebuilders, SMEs and purpose built rental housing. In addition, the Government put its weight behind the compulsory purchase of land banked by developers for financial reasons and put more pressure on local authorities to deliver planning permissions.
Buy-to-let investors were less fortunate however, with institutional investments receiving attention from the taxman once again. From January 2018, the ‘indexation allowance freeze’ will eliminate the discrepancy between the tax paid by companies and individuals when selling assets. This will undoubtedly come as a significant blow, especially with many stakeholders being drawn to the tax advantages of institutional investments in recent years.
Of course, only time will tell whether the Chancellor’s new policies have the desired effect. Within the context of potential market disruption however, investors should seek to manage risk out of their portfolios. With title insurance, investors can be assured of a clean exit if the market demonstrates significant signs of distress.