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It’s usually on my mind to cover off some of the key points from the Chancellor’s Budget and that’s the plan for this week’s episode too. So, after a seemingly endless raft of changes from recent Budgets & Autumn Statements – now merged into one annual Budget, what do we have to look forward to, or indeed fear, from the latest Budget then? The title of today’s episode does give something of a clue, so don’t expect a long and winding road this time folks!
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Transcription of the show
Hello and welcome to another episode of The Property Voice podcast. My name is Richard Brown and, as always, it’s a pleasure to have you join me on the show again today.
It’s usually on my mind to cover off some of the key points from the Chancellor’s Budget and that’s the plan for this week’s episode too. So, after a seemingly endless raft of changes from recent Budgets & Autumn Statements – now merged into one annual Budget, what do we have to look forward to, or indeed fear, from the latest Budget then? The title of today’s episode does give something of a clue, so don’t expect a long and winding road this time folks!
Right, let’s cover off the main aspects of the Budget that we should be concerned about right now.
Property Chatter
Budget – November 2017
Let’s look at the key points from last week’s Budget, along with my take on them. Essentially, there were 3 major aspects of the Budget that could have a direct impact on us as property investors: Stamp Duty, support for housebuilders & developers and some promises to talk some more about a few things property-related…
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Stamp Duty
Don’t get too excited as this does not affect us directly. Instead, the Chancellor has decided to give around 80% or more first-time buyers a helping hand by abolishing stamp duty overnight!
First, the policy change: first-time buyers will be exempt from paying stamp duty on properties costing up to £300,000, or the first £300,000 on properties costing up to £500,000.
What difference will it make? Well, in most of the outer regions of England and Wales, which are covered by the announcement, not that much really! No stamp duty is payable by first-time buyers or indeed all single homeowners on the first £125,000 of purchase price anyway. The average home first-time buyer purchase costs around £200,000 nationwide, so the typical saving is going to be around £1,500, but falling to around £1,000 outside of London and the south-east.
In London and the south-east, the savings could be more significant at an average of around £11,000, however, already high deposit levels and other moving-related costs could blunt it’s effect somewhat.
Of course, as property investors, not only do we not qualify for the first-time buyer stamp duty saving, but we also have to pay a 3% stamp duty premium as well. This could potentially lead to investors being outbid on typical starter home types of property acquisition, especially if we intend to buy using a mortgage. The reason that mortgage-backed investors could suffer more is down to tougher lending affordability hurdles we also have to jump over.
Many of the industry commentators suggest that the stamp duty saving will probably be passed onto to vendors in the form of higher prices in any event, rather than offering a genuine saving to first-time buyers. It kind of makes sense if you think about it, first-time buyers will be able to bid more for a property in the knowledge that they can nick a little back through the stamp duty saving. So, it does little to support stretched affordability of first-time buyers in truth.
In terms of fixing our housing supply, it does nothing for that either, as it was we would call a demand side incentive rather than a supply side one.
Personally, I suspect the incentive is aimed at providing a boost to the housing market, which in terms of transaction levels, especially in London and the south-east, has been struggling of late.
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Support for housebuilders and developers
£44Bn sounds like a lot of money doesn’t it? Well, that’s what has been promised to support housebuilders and developers. However, that’s over the next 5 years, so that reduces the average to £8.8Bn a year, which doesn’t sound quite as big a number now does it?
£15Bn of this has been promised as cash support directly to housebuilders, but over half of that at around £8Bn is in the form of loan guarantees and not cash at all. There are some other bits and pieces around the edges, including £1.5Bn over 5 years in loans aimed at helping to kickstart development projects for small housebuilders. However, as observed by Anthony Coding, the housebuilding analyst from the investment bank, Jefferies, this amounts to around 30,000 plots of land over 5 years. This is against a target of 300,000 new developments a year! So, if you are a small developer thinking this could help you to fund your next project, don’t hold your breath, will you?
I think there are some decent ideas here, but in truth they are mere drops in the ocean when it comes to providing a significant boost to the housing supply.
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Yet more talking about fixing the housing market
In addition to the stamp duty change and the assistance to housebuilders and developers, there were some promises to talk some more. As suggested by a piece in the FT, the talking shops, or rather consultations, perhaps building on the Government’s Housing White Paper, will centre around:
- Minimum densities for housing development in city centres and around transport hubs,
- Changes to policy to make it easier to convert retail and commercial land into housing.
- More room to borrow for Councils in areas with “high affordability pressure”.
- Councils will also be able to apply more council tax to empty homes.
- A consultation on the barriers to landlords offering longer tenancies to tenants
- An extra £125m aside to increase the housing benefit of those living in fast rental growth areas.
To be fair, there are some good things in here too, but the reality is that many of the commitments right now are just pledges to talk, rather than any concrete policy change. So, a step in the right direction, so let’s leave at that.
Besides that, there is nothing really earth-shattering in the Budget, unless you are an overseas investor with interests in commercial property, which is not a significant proportion among our listenership. But if that is you, best that you read the small print!
OK, after covering off these key Budget points quite quickly this week, I shall give you some time back in your day. Although, next week should be a full and highly practical episode. I plan to have a special guest with me to talk about some ways to make more money from our home, perhaps even turning what Robert Kiyosaki considers a liability into an asset? So, do make sure you join me next week for that won’t you.
That’s all for this week, and as usual, you can email me podcast@thepropertyvoice.net if you want to talk about anything from today’s show or more generally in property investing. Also, the show notes will be over at the website www.thepropertyvoice.net
But for now, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao ciao.