With just two days to go before Chancellor Philip Hammond makes his inaugural Autumn Statement to parliament on 23 November, senior figures from the UK’s property industry are expressing their wishes about what he will say in this highly anticipated speech.
With Brexit, a reduction in the Bank of England base rate and a surprise new president-elect from the USA occurring since the last Chancellor, George Osborne, made his final Budget, there have been major changes in domestic and international politics and more and more attention on Britain’s property market.
The recently published Redfern Review has also drawn focus on the reasons why the country’s homeownership profile has changed over the past 12 years, while simultaneously debate has continued on the shortfall of new homes being constructed in the UK and what targets need to be set to overcome it, no more so than at an event WhatHouse? hosted in London just a few months ago in London.
As our previous previews two weeks ago and last week have showed, industry professionals are hoping Hammond tackles several major issues in his address to the House of Commons this week.
Stamp duty (SDLT) has been top of many agendas, and Trevor Abrahmsohn, managing director of north London estate agency Glentree International, agrees that it’s a priority for change as soon as possible: “Stamp duty at the lower end of the market, up to £900,000, has been reduced by the former Chancellor Osborne, and this will bode well for the UK and housebuilders in this price range. Where the problem lies is the middle to upper end, which has been hit hard, particularly in London, by the changes to SDLT where transactions are down by up to 70%, values down by 35% (from the highs of 2014) and where stamp duty receipts are considerably lower.
“Housebuilders, particularly in London, are struggling with an over-supply and shrinking demand. International buyers are being put off by the high property taxes and the ‘non-dom’ changes. Mr Hammond, sir, please recognise that your predecessor ‘over-cooked the goose’: bite the bullet and reduce stamp duty from these stratospheric levels to something that the consumer feels is affordable and will not stop a transaction taking place. You will get more revenue, and the system will be stimulated with a myriad of benefits for all. It’s called a win-win.”
Spencer Botchin, director at Sandfords, adds: “Let’s hope it’s a friendly one for the property market as it certainly hasn’t been for the last few years. The 3% stamp duty surcharge on second homes needs to be scrapped. The additional hikes have hit those looking to buy a second home in London the hardest. Since the new legislation was introduced in April 2016, it has proven to be unreasonable, particularly for people wishing to save money. Banks are not offering great interest rates so people have been looking to invest their money elsewhere, but the surcharge is making this much more difficult.
“The overhaul in the UK’s property tax system (stamp duty at the upper end of the market) has single-handedly caused chaos around London. The levy on properties valued above £1.5m rose to 12% back in 2014, but this needs to be lowered in order to generate further foreign investment which is vital for the Prime Central London market.”
Nick Davies, head of residential development at Stirling Ackroyd remarks: “George Osborne’s reforms were flawed and his Notting Hill neighbours certainly won’t be impressed with his stamp duty legacy. We have also seen a shift towards the east of the city, particularly Islington and Hackney where prices are rising significantly, putting even more pressure on first time buyers who want to stay in the area – something the likes of Jeremy Corbyn and Diane Abbot won’t be impressed with either.
“The government should take the opportunity to think again on the stamp duty surcharge, and should also look at cutting the cost of stamp duty across the board as the tax serves only as a disincentive to moving home.”
Robin Paterson, joint chairman and CEO of United Kingdom Sotheby’s International Realty, says: “We sincerely support and believe in the Telegraph’s campaign to slash stamp duty. It is undeniable that not only have the stamp duty reforms not delivered in terms of expected revenue but they have also stalled the UK property market. I propose that stamp duty is halved from the 5% threshold upwards, the treasury would benefit from an increase in transactions and the market would receive a much needed boost. The 2014 stamp duty reforms had a significant impact on all aspects of the market but most crucially on British buyers. We need these buyers back to create movement at all levels.”
The supply of new homes is the topic most troubling Glen Wilson, UK head of real estate at Lloyds Banking Group: “Tackling the housing shortage needs to remain top of the agenda for the Chancellor’s Autumn Statement. While UK housing stock has increased by 200,000 in the last 12 months and there has been a 52% increase in housing supply over the past three years, more still needs to be done.
“Our latest report on the housebuilding sector highlights a real concern from senior industry members about their ability to tackle the housing crisis effectively. Specifically, they call out the lack of skilled construction workers and ‘slow’ planning systems as barriers that must be overcome before the problem can be solved.
“The government must focus on increasing provisions for housing, but also ensure the skills agenda remains a priority so businesses throughout the housebuilding supply chain can access the manpower needed to drive growth. We’re committed to supporting government in its work to address the housing shortage. Our Housing Growth Partnership is a £100m joint venture with the government that is investing in SME housebuilders to improve supply of housing and accelerate the development of homes.”
Nick Sanderson, CEO at multi-WhatHouse? Award-winner Audley Retirement Villages, agrees, but believes the more common focus on first-time buyers needs to be expanded further: “There is one issue that needs immediate political attention: we have a severely inadequate number of suitable houses to meet the demands of an ageing population.
“The Chancellor needs to put in place planning covenants that will support the development of aspirational retirement property, with land to be allocated accordingly. Competition for sites is ever increasing so, without a particular focus on housing for older people, delays to building will simply continue. Newer developers, who could help to increase the number and quality of housing options available, will remain out in the cold.”
Paul Teverson, director of communications at specialist developer McCarthy & Stone, also sees the need for wider vision across the whole housing market:“We have been encouraged by the recent announcements from the new government that they are going to look beyond starter homes to solve the housing crisis. While commendable, supporting first-time buyers is not a complete solution. We need more types of all housing and tenures, and would like to see a greater focus on the housing needs of older people.”
Difficulties on the rental market are also high on the list of many property experts, including James Davis, CEO and founder of online letting agent Upad: “Rent arrears are becoming the fastest-growing problem for landlords, as well as tenants across the UK, and this will no doubt be their biggest issue in 2017. Not only have investors had to contend with the new 3% stamp duty surcharge this year, but from April 2017, they are also facing plans to prevent landlords deducting mortgage costs from rental income and limiting tax relief on mortgage interest payments.
“These increased landlord costs will only make matters worse, especially for tenants who in some of the most expensive areas, such as our capital, are paying up to two thirds of their salary on rent.
“The Chancellor needs to think carefully about the damage that is likely to be done, primarily to tenants, particularly if people are relying more on the lettings market than the sales market going forward in the wake of Brexit. Over-stretched landlords will try to recoup these additional taxes by increasing rents, but if wages struggle to increase more than inflation, landlords will struggle to secure rises, putting the entire lettings financial model at risk.”
Marc Langdon from the Norwich office of estate agency Bidwells says: “I would like to think that the Autumn Statement will benefit the housing market and that the government gives some clarity on how they perceive the buy-to-let market moving forward, particularly in light of the tax and stamp duty changes that came to the fore this spring. There is a question mark over whether these have been wholly beneficial to the wider market in light of events in 2016 and some revision is sorely needed to reflect the drop in transactions.”
Langdon also sees confusion among consumers on the future of the one of the government’s major initiatives to support the housing market: “The question of affordability looms large over the market and the recent announcements regarding the cessation of Help to Buy for second-hand homes by Christmas, has led to some confusion as Help to Buy for new homes continues. An announcement to this effect by the Chancellor would be helpful.
"The government pledging ongoing support, whether it be Help to Buy or other shared equity incentive schemes, will assist the ever increasing issue of housing the population at affordable prices without state commitment to the building of council houses again. To this end, freeing up the considerable amount of brownfield stock associated with local government and national institutions on favourable…terms at competitive prices would help to increase stock in urban areas. This would be managed by strict implementation and financial implications to developers who do not build within an agreed time frame.”
Chloe Marienbach, UK manager of online flatsharing marketplace, Weroom.com, remarks: “With buying a less likely option for some in today’s economy and the size of the rental market potentially shrinking, the government need to better support landlords who are at risk of selling their properties to cover their finances.
“It is fundamental that the government also provide more support for renters. The likes of the lifetime and Help to Buy ISAs have been great in helping those who are attempting to get onto the property ladder but something similar should be put in place for renters – people who are not yet in a position to purchase a property and are renting long term.
“In previous years, the Budget and Autumn Statement announcements have had a strong focus on assisting first-time buyers on to the property ladder, which is certainly not a negative effort. However, given the uncertainty of today’s property market and a large number of young people still in rental accommodation, it is important for the government to refocus their attention on how they can better improve the conditions of the rental market and how they can support those within it.”
Rob Weaver, director of investments at residential crowdfunding platform Property Partner, adds: “Philip Hammond’s priority should be to revisit stamp duty, both the extent of the sliding scale up to 12% and the additional 3% on second homes. To quote a previous chancellor, Nigel Lawson, this is a tax on mobility. Homeowners are sitting tight, discouraged from moving because of the tax costs, and buy-to-let investors are considering whether it’s worth the hassle and stress of building a property portfolio.
Audley Retirement Homes’ Nick Sanderson, however, wonders if too much attention has been given to the government’s multiple schemes for younger buyers: “For years, hopes of a solution to the housing crisis have been pinned to policy that supports first-time buyers alone – with starter homes, Help to Buy and Shared Ownership just a few of the many initiatives. However, these measures simply address the symptoms and ignore the underlying causes of the problem: a housing ladder that has become increasingly bottlenecked with baby boomers in unsuitable properties due to a lack of quality accommodation for them to move into. In fact, two in five UK homes are under-occupied, of which half are occupied by those aged 50 to 69.
“We have seen enquiries remain constant in the months since the referendum, so it is clear that demand remains high, and policies that support the increase in supply are therefore vital. With an expected 70% increase in those over the age of 65 by 2037, we can only expect a housing black hole if it is not addressed.”
McCarthy & Stone’s Paul Teverson backs up Sanderson’s views: “Both Savills and Knight Frank have said this sector of the housing market could grow, with the right national planning environment, from building around 5,000 units a year to 20-30,000. This would make a sizeable contribution to the national housing shortfall, plus there is also the release of all the larger dependent properties back onto the market.
“To achieve this, we would like to see a drive from Government to encourage greater interest and delivery in this end of the housing market – the top of the ladder. We have two key recommendations to achieve this.
“First, we would like to see the NPPF – the National Planning Policy Framework – revised to refer more to older people. They are mentioned just once in the current draft. We believe strong national planning would encourage new developers to enter into this sector, and ensure there are more proactive local planning policies.
“Second, we would like to see a one-time exemption from stamp duty for older people when downsizing. The significant costs of moving in later life are not only a major disincentive to downsizing, but also serve to block the wider housing market. The costs of these measures would be recouped with additional stamp duty gains from those families moving into these vacated properties. A 2014 review by the Institute of Public Care noted that exempting older people from stamp duty would benefit them and the housing market, whilst the benefit to HMRC would be significant – an achievable 20% increase in the number of older people moving, netting HMRC an estimated additional £644m per annum, even when factoring in the initial loss of income, because of all the additional chains that would be created which are otherwise blocked.
“There is a big prize on offer by providing better housing solutions for older people, and they need to form part of future housing policy.”
Sandfords’ Spencer Botchin also wants another topic to receive attention: ”I hope the new Chancellor addresses the current mortgage process situation, which is far too slow. It’s becoming almost impossible with banks taking too long with mortgage applications. The process needs to be made a lot quicker from start to finish as it’s currently slower than it has ever been due to the questions asked and the processes they go through to get what they need. Commonsense at times needs to prevail.”
So it seems Philip Hammond is under pressure, on behalf of first-time and last-time buyers, to revolutionise stamp duty again as a way to kick-start Britain’s property market, as well as taking steps to improve a host of other aspects to our current system.