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Pre-budget report offers no relief for property market

Thursday 10th December 2009

The pre-budget report was a harsh reminder - as if we needed any - of the dire state of the UK economy.

Distant hopes that the Stamp Duty holiday might be extended beyond 31 December were dashed this week. And it seems, other than emergency funding to the worst off, straightened times quashed the chance of a giveaway to a property market, which has risen from the ashes and is finally making its own way, however fragile that way seems.

Headline funding went to low carbon technology investment and job creation for UK youth, with little for a market still struggling like many others.

Council of Mortgage Lender (CML) figures show property buyer figures at a two year high. There were 55,000 completed property transactions in October and although remortgaging figures are still at their lowest since 2002 at 33,000, buying figures have risen 100 per cent since the year-low.

Struggling small businesses had more to celebrate as the government froze its planned one per cent rise in corporation tax for another year. It also launched a GBP 500 million Growth Capital Fund in collaboration with banks to invest in small firms.
The Enterprise Finance Guarantee scheme, which gives government backing for bank loans to SMEs, will also be extended, providing guarantees for another GBP 500 million.

But these are sticking plaster measures to help small firms on the cusp of failure, not measures designed to create a new era of business growth.

The hideous government borrowing projections drew shocked looks from both sides of the Commons as the full extent of UK PLC’s trouble was laid out by Chancellor Alistair Darling yesterday. Net debt is set to rise to 78 per cent of GDP from 56 per cent this year by 2014/15. That figure is trumped by the US, which is already at 85 per cent this year. But when all the other G20 countries, including the US show signs of growth and we trail, still sitting in recession, the budget’s dependence on sizeable UK growth seems far from assured.

For the property market, everything hangs on a broader range of better-priced mortgage products. As a massive revenue earner for the government and the cornerstone of private wealth in this country it deserved more attention. Even more government direct intervention to stimulate mortgage lending would have been welcomed

However, the industry will continue to bump along on three-wheels. But in comparison to the rest of the economy’s troubles, it became a victim of its own weak but relative success for now.

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