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Budget 2020: Yopa presents wishlist

new homes

Mike Scott, chief property analyst at estate agency Yopa

The Budget will take place today, and the new Chancellor, Rishi Sunak, will want to put his stamp on the economy. The housing market is not working well at present, with home ownership rates falling, especially for younger people, and at Yopa we believe the government needs to take urgent actions to reverse this trend.

Housebuilding

Further measures to support housebuilding are needed, but they must encourage house-builders to build more houses, rather than just making more profit on building the same number of houses. We suggest a carrot and stick approach, with new taxes on land with planning permission for housing if it remains undeveloped for three years or more. There should also be rules implemented to prevent builders from simply delaying the planning permission applications on their land banks. In return, the process of applying for planning permission must be made quicker and cheaper, especially for small developments and small builders.

Mortgage lending

The current Help to Buy schemes are largely aimed at helping first-time buyers who are buying new homes, but most homes that are bought are second-hand. We would like to see similar help for first-time buyers who are buying second-hand properties. In particular, we would like to see government action to reduce the size of the deposit that first-time buyers have to find, without risking new instability in the banking system from forcing mortgage lenders to take on the additional risk. This would probably involve some kind of government indemnity guarantee on part of the purchase price, with the mortgage lender able to recover that money from the government if the property has to be repossessed and if it doesn’t fetch enough to fully pay off the mortgage when it is sold.

Finding the money for a deposit remains the biggest obstacle to first-time buyers, and a scheme like this could substantially reduce the average amount of deposit required by first-time buyers at little actual cost to the government – unless there was a collapse in the housing market, which we believe is unlikely.

Council Tax adjustments

If the Chancellor needs to raise some money, he could look at adding one or two additional Council Tax bands for high-value properties, as has already happened in Wales, thus increasing Council Tax for owners of the most valuable properties. It would effectively be a so-called “mansion tax”, but done within the existing Council Tax system rather than creating another new tax. Ideally, this could be combined with the decades-overdue revaluation of every residential property for Council Tax, which (in England) is currently based on what houses were worth in 1991, almost 30 years ago, even in the case of properties that weren’t actually built until the 2010s. This would cause controversy, since there would be losers as well as winners, but it would fit well with the government’s rhetoric about levelling up and helping struggling areas such as certain North East towns, since these areas’ house prices have not done so well over recent decades and so they would mostly benefit from revaluations and adjustments to the current Council Tax bands.

Leave Stamp Duty alone

Finally, we do not believe there should be any further changes to Stamp Duty Land Tax. Few first-time buyers now pay any Stamp Duty at all on their purchase, and most home-movers have enough equity to afford it, so it is not a serious obstacle to people who are buying houses to live in. It is slowing down the markets for buy-to-let property and other second homes, and for very high-end properties worth £1 million or more, but this is deliberate government policy, and shouldn’t be stopped just because it is working. The money it would cost to cut Stamp Duty rates again would be better spent elsewhere.

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