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UK property industry welcomes finance statement but questions if it is enough

For buyers it is not good news with property professionals pointing out that failing to extend the stamp duty holiday for first time buyers will have an impact. The temporary temporary first time buyer stamp duty concession will now end on 24 March 2012 as planned.

Council of Mortgage Lenders director general Paul Smee said he was disappointed by the decision. ‘While the concession may not have stimulated additional demand, it was a significant help to home owners entering the market and its removal runs counter to the themes of the new housing strategy. It is likely that we will see a bunching of eligible first time buyer transactions early next March to beat the expiry date on the concession,’ he explained.

Jennet Siebrits, head of residential research at property consultants and advisors CBRE, said there is a significant number of first time buyers who have been unable to enter the market over the last decade, estimated at around 1.4 million people.

‘It is disappointing that the Government has announced that they will not extend the stamp duty holiday beyond March 2012. While they have deemed it to be ineffective, it provided a small but important incentive to buyers which encouraged movement at the bottom end of the market,’ Siebrits explained.

This decision will undermine the government’s own attempts to kick start the first time buyer market across the country, according to Peter Rollings, chief executive officer of estate agent Marsh & Parsons.
‘While the new mortgage indemnity scheme may improve the accessibility of mortgage finance to many credit worthy borrowers, first time buyers will need to save for longer to pay the stamp duty bill as they move,’ he said.

‘If the government aimed to stimulate the national first time buyer market in spite of the wider economic conditions, combining the extension of the stamp duty holiday with the new indemnity scheme would have boosted the chances of a significant increase in first time buyer activity. In effect, Osborne is giving with one hand, and taking away with the other,’ he explained.

He also believes that the Chancellor has missed an open goal by failing to address the outdated and iniquitous stamp duty tax system. ‘As things stand, stamp duty is a regional tax rather than a national progressive tax, and buyers in London and the South East must bear the financial brunt of the tax for the simple reason that house prices are higher. This will remain the case for as long as the duty doesn’t take into account the fact that house prices are not uniform across the country,’ he said.

‘The housing market plays a vital role in supporting the UK’s economic growth, and a more equal and progressive tax system alleviating the pressure on the lower tier of the market across the whole country would create a busier market. In turn, a healthy housing market would feed the wider economy, boosting demand for supporting industries and creating opportunities for builders, electricians, kitchen manufacturers and plumbers to name but a few,’ he added.

Andy Hill, chief executive of the Hill Group of Companies, one of the leading names in affordable housing in the UK, pointed out that many developers have been driven away from the first time buyer sector by the lack of mortgages available to their customers.

‘The Government's £500 million Growing Places Fund must be allocated to carefully selected larger development projects which, when unlocked, will have a real impact on employment, the delivery of housing and the health of the local economy. £500 million sounds like a lot of money, but infrastructure is extremely expensive and it would be a mistake to try and spread the fund too thinly,’ he said.

‘The £400 million Get Britain Building investment fund is a great slogan but the Government needs to ensure that this translates into tangible employment opportunities in the short term, alongside the swift delivery of the NPPF (National Planning Policy Framework). Development projects have been rendered untenable not just through lack of funding, but also because of planning turmoil,’ he added.

When it comes to property investment the Chancellor’s insistence that the UK will not adopt a Financial Transactions Tax has been welcomed by the British Property Federation. ‘The Chancellor is to be congratulated for not bowing to European Union pressure to introduce the FTT. The FTT would have left the property industry in line for a seriously damaging tax liability that would wipe out a large part of the taxation benefits of REIT status and shrink the returns available to investors in real estate funds, many of whom will be pensioners,’ said Liz Peace, BPF chief executive.

‘It would also have done untold harm to the wider financial services sector, something that would impact badly on occupier demand, particularly in London, upon which much of our industry depends,’ she added.

Many in the industry had been hoping for measures to support the growth of the private rented sector but were disappointed. ‘Measures to encourage institutional investment in rented housing are moving in the right direction, but much more is required to overcome the under development of professionally managed, custom built rented housing,’ said CBRE’s Siebrits.

Colleague Peter Damesick, EMEA chief economist at CBRE, pointed out that the longer term impact of measures aimed at boosting house building and investment in infrastructure are dependent on how successful government will be in leveraging private sector investment.  ‘Infrastructure investment is potentially attractive to pension funds, but they will want to invest in stabilised, income producing assets,’ he said.

And Siebrits pointed out that housing supply is fundamentally constrained and rates of building need to double to be sustainable and meet growing population needs. ‘By unlocking 16,000 new homes the £400 million Get Britain Building fund is to be applauded, however more still needs to be done to increase supply across all tenure types as the UK is suffering from a shortage of places for people to live,’ Siebrits explained.

‘An increased focus on house building is essential if we are to tackle the cumulative shortfall of more than half a million homes over the last five years. Investment in construction has far reaching economic benefits and recent figures suggest that for every home built, one and a half jobs are created. Investment in this sector is therefore money well spent,’ Siebrits added.

Osborne’s statement was good news for home owners and the property market in general, accoridng to Samantha Baden, property analyst at FindaProperty. ‘The mortgage indemnity scheme will bring welcome relief to 100,000 people and help first time buyers get a foot on to the property ladder, as will the 50% discount for social tenants wanting to buy their own home,’ she said.

And she pointed out that all home owners should benefit from the announcement that £30 billion will be invested in new infrastructure projects. ‘New transport and utility projects will open up areas for housing and jobs and bring new areas of the UK within commuting distance of major urban centres,’ she explained.

‘While some people will resist this change, for the country as a whole, good infrastructure is the seed for jobs, economic growth and the housing market, all of which is good news for home owners and those aspiring to get onto the property ladder,’ she added.

Nicholas Leeming, business development director at Zoopla was another professional who was disappointed over stamp duty for first time bueyrs. ‘It’s now Plan B for the first time buyer market. The stamp duty holiday has been scrapped because it was not deemed to be doing enough to boost buyer numbers and instead the government is focussing on underwriting loans for first time buyers and boosting affordable housing supply,’ he said.

‘But these plans should not be mutually exclusive. If the government is serious about helping people get onto the housing ladder then underwriting loans and increasing supply should have been introduced to support the stamp duty holiday, not replace it. We’re now in danger of house-builders and lenders cherry-picking the schemes which suit them rather than the market which could leave us in exactly the same position in twelve months time,’ he added.

Adrian Coles, Building Societies Association director general was also disapppointed. ‘Today's announcement provides an additional barrier that first time buyers need to overcome and despite the recent, welcome, housing strategy announcements, it feels as though the Government is giving with one hand, whilst taking away with another,’ he said.

As was Wendy Evans-Scott, president of the National Association of Estate Agents (NAEA). ‘As such, today's Autumn Statement fails to provide much comfort to the property market. First time buyers are the lifeblood of the property market, and our recent data shows the number of first time buyers getting on to the housing ladder has reached a three year low,’ she said.

‘With the stamp duty holiday disappearing from next March, the Government will need to do more to help the fragile first time buyer market,’ she added.

Ray Boulger of independent mortgage adviser John Charcol said that the announcment that the stamp duty exemption for first time buyers was not being extended was a missed opportunity to make the whole stamp duty system fairer.
‘Even if The Chancellor could not afford to lift the £125,000 starting threshold for the tax, changing the system so to work like income tax would have particularly benefittedtime buyers, most of whom buy at under £250,000,’ he said.

‘For example a nil charge on the first £125,000 and then 2% on the excess over £125,000 up to £250,000, with a similar structure for higher purchase prices, would so obviously be fairer. It is hard to understand why the Chancellor hasn't introduced something along these lines,’ he explained.

‘Using these figures a purchase at £150,000 would only incur a tax charge of £500 rather than £1,500, which would make a significant difference to someone struggling to save a deposit,’ he added.