New homes industry urges Chancellor to make major changes in his Autumn Statement

With Chancellor Philip Hammond set to make his first Autumn Statement on Wednesday 23 November, speculation is already under way on what he might say to tackle Britain’s housing crisis, and there are many industry figures with a strong opinion about what he should be doing.

This is the first of a series of articles where we speak to senior property industry figures to find out what it is precisely that they think Hammond should be doing to increase the number of homes we build to start to meet demand across the country.

Arguably the most popular option for many housebuilding executives is for the Chancellor to scrap his predecessor’s 2015 changes to stamp duty for buy-to-let investors and second-home buyers. This introduced a 3% surcharge on properties that are not principle homes, which started in April this year.

“The additional stamp duty charge introduced in November 2015 for buy-to-let investors and second homes has had a significant impact on the construction industry as a whole,” says Dale Wagstaff, managing director of Howarth Homes. “It has triggered a slowdown in the demand for new build rental properties, as well as for larger family homes. The extra stamp duty is making families think very seriously before incurring the significant increase in the cost of moving. It is also affecting the number of new homes being started, which in turn has had the knock-on effect of reducing demand for materials and labour too.”

John Elliott, at the helm at Millwood Designer Homes, adds: “Charging landlords an additional 3% on top of their already hefty stamp duty fees is not the solution to creating a healthy and competitive rental market that offers fair value to tenants. The introduction of the surcharge was an ill-advised attempt to blame buy-to-let landlords for the shortage of available homes and restrict them from buying the new homes meant for first time buyers, young families and other would-be homeowners.

“However, clearly it is not the fault of the landlords that there is such a shortage of new homes being built and it is up to the government to see through their commitment to building 300,000 new homes a year.”

There seems to be general agreement from housing industry figures that focusing the changes on landlords was an error from George Osborne. “Landlords play a key part in providing much needed housing and many schemes are build on the basis of a level of demand from landlords,” says Melanie Omirou, group managing director of developer Acorn Property Group, “so this tax will reduce the number of new homes being built and rental properties available to the most vulnerable and needy in the community.  Not everyone can buy a home or indeed should buy a home in today's environment where a mobile workforce is so crucial.”

Elliott also points out a detail in the current system that causes a headache even for those not looking to build a property portfolio: “Many people do not appreciate or understand they will be liable for this surcharge if they have not sold their existing home by the time they buy their new home.  True it can be reclaimed, but the very thought of going through a government system to reclaim the tax that should not have been imposed in the first place is an anathema to many.”

The buy-to-let stamp duty hike followed the previous year’s shake-up of the whole stamp duty calculation process, which saw huge rises in what is payable on high-value homes.

“The current level of transaction tax has been pitched too high and has resulted in the high end of the market grinding to a virtual halt,” says Colin Tutt of Octagon. “Potential homebuyers have hesitated at the thought of paying 12% or more in stamp duty with many thinking twice, putting the decision on hold and some preferring to enlarge and improve their existing home thus adding value to their current property rather than moving. I hope Philip Hammond will take the opportunity to look again at stamp duty and make some changes.

John Elliott agrees: “For houses costing more than £1.5m, the tiered system for stamp duty now means purchasers are paying 12% on the proportion of the purchase price over £1.5m, which is 25% more than previously and clearly an unsustainable level to expect people to pay. Especially with the surcharge as well! It would be a quick win for the government to reform stamp duty in such a way that would result in increased positivity in the property market

Dale Wagstaff adds: “Creating fresh demand from small-time investors (purchasing a second home as an investment for their children/pension) would encourage developers to boost production. This would increase the supply of new homes available to first-time buyers too as well as creating jobs and additional tax revenues - surely a win-win policy!”

Stuart MacArthur, owner of Living Oak, a Surrey-based company which produces timber-framed new homes and extensions, saw some benefits from last year’s changes but wishes to see a wider approach to reforming the housing market: “Promises have been made for £2bn investment and [a] £3bn housing fund but there is still a need for affordable housing in the UK.

“First-time buyers have benefitted greatly from the government backed Help to Buy initiative but, for those who already own a property, staying put and renovating their homes is becoming an increasingly popular choice. The cost of stamp duty, reduction in the bank rate and easier borrowing has enabled many home-owners to renovate and extend in order to obtain their dream home, rather than move and for Living Oak this has resulted in a 25% rise in new projects in the last three months alone.

“We are hoping that the Autumn Statement will deliver more support and investment in small businesses, easier lending for homeowners and changes in stamp duty, all of which will ensure the continued growth and success of our business.”

John Elliott believes the Chancellor is facing a crucial time to make significant changes to the UK’s housing landscape: “Given the wider economic and political picture, the government would do well to make some positive announcements in the Autumn Statement.”