Improving housing market activity is not only good for the property industry but for wider economic growth given its huge impact, for instance, on job and social mobility.
Overall, we are hoping to see the Budget increase longer-term certainty and stability, particularly in the highly volatile mortgage market, which should increase confidence and the number of transactions.
As with all Budgets, the Chancellor must perform a delicate balancing act – raising revenue without compromising growth – especially difficult for Mr Healey this time while protracted uncertainties in other parts of the world are contributing more than usual to rising interest rates and inflation.
There is a general consensus that population and household formation numbers are continuing their inexorable rise which is adding to the present shortage of homes to buy and to rent. But the housing crisis won’t be solved by extra building alone bearing in mind developers will only build what they can sell.
The government’s ‘Your First Home’ scheme should increase demand eventually after mopping up unsold stock, but it needs to be complemented by more immediate moves to raise supply as well as accelerate planning and delivery by reducing regulation and delays. That is to say nothing of more incentives required to increase energy efficiency – including retrofit – and capacity.
The Chancellor needs to set price caps to ensure the new arrangement is viable for developers and wage limits are proportionate to local affordability for aspiring first-time buyers, who are the engine room of the market, to take that crucial first step on the housing ladder. If those benchmarks are not balanced, new-build numbers will fall further behind the government’s target and the resultant greater demand for renting will prolong the imbalance in the market.
Carefully targeted incentives
Encouragement for downsizing wouldn’t go amiss either, as this helps to connect chains at the other end of the ladder by releasing ‘right-sized’ homes for those more in need of them.
We also need to make better use of existing resources such as bringing empty homes back into use more quickly.
On rentals too, there are apparently around 25 per cent fewer homes available now than before the pandemic as landlords leaving the sector, due to mounting tax and regulatory issues, are not being replaced quickly enough. Carefully targeted additional incentives will encourage new entrants, as well as existing landlords to stay, while the added competition will improve standards as well as keep rents in check.
On wider tax issues, the decision not to increase capital gains tax may actually persuade some landlords to sell rather than remain.
New price limits on the value of property that can be purchased with Lifetime ISAs (LISAS), which allow first time buyers to save for a mortgage deposit tax-free with a 25 per cent government bonus, are likely to be announced. The change should allow for purchases everywhere, including London, where the present limit of £450,000 needs to be raised to nearly £600,000 just to keep pace. It is said that at present over a third of first purchases in the capital are greater than that figure – up from around a quarter when the scheme was launched nine years ago.
Whatever happens, the Chancellor should be congratulated for flying so few kites as a way of testing policy decisions before the big day this time. Speculation is the enemy of the market as it creates indecision, particularly for mortgage rates, and restrains activity.
In our offices over the past few months, buyers and sellers have needed little excuse to ‘sit on their hands’ in such sensitive times, especially when they don’t know what’s happening so find it difficult to set their own budgets.
However, as always, we hope not too many rabbits are pulled out of the hat or that there are nasty surprises lurking in the small print.
