The Autumn Statement does not make it easier to buy a new home

The majority of the WhatHouse? audience do not think the Autumn Statement has made any difference to their ability to buy a new home.

Around 56% of respondents said they think there will be the same level of difficulty in buying a new home now compared to before. Just 12% think it will be easier, while 32% think it is now harder to buy a new home.

The Chancellor, Philip Hammond, announced measures to try and tackle the shortage of affordable new homes by investing £2.3bn to “unlock land for housing” to deliver infrastructure for up to 100,000 new homes and a further £1.4bn to build 40,000 affordable homes by 2020/21.

However, there were no changes to stamp duty. Many in the industry wanted this to be abolished as it is a barrier to many people getting on the property ladder, a view clearly held by WhatHouse? readers as shown by our previous survey in the run up to the Autumn Statement.

The economic background

The Chancellor delivered his financial plans against a backdrop where austerity and government debt are still major factors and politically sensitive. Hammond had little spare cash to use.

On that basis, most in the industry were relatively pleased with the extra funding for affordable housing, but there was no new initiative or announcement that is going to prove to be a game-changer.

David Jervis, managing director of Spitfire Bespoke Homes: “The current housing crisis spans all tenures and levels because of a fundamental lack of available homes. The Chancellor’s measures offer some relief to parts of the market but we hope additional measures in the upcoming White Paper on housing will bring a wholesale boost to the property market.”

Why is it now harder?

Another factor that backs up the view that the Autumn Statement has not made it easier to buy a new home is that there will be a significant delay in when the affordable housing announced will be ready.

Consistent skills shortages, planning delays, accusations of landbanking and bureaucratic delays could all hinder a process that takes at least 18 months anyway.

House price to earnings ratio

House prices have continued to rise over the last two decades when compared to first-time buyer earnings. The ratio of mortgage borrowing to earnings has increased to more than 10 times in London and to that level or approaching it in key cities such as Cambridge, Oxford and Bristol.

Data from Nationwide Building Society shows that in the first quarter of 2000, first-time buyer gross house price to earnings ratio across the whole of the UK was 2.8 times and 4.3 times in London. Almost 17 years later this has increased to 5.4 times across the UK and 10.3 times for London. So, on that basis, it’s twice as hard to borrow enough for a mortgage.

Historically, banks will lend 4x a borrowers’ annual income. This is nowhere near enough even with a substantial deposit to buy a property in many parts of the UK.

House prices

There is no sign that prices are going to fall to any great degree. The impact of Brexit has barely registered on house prices. The Halifax house price index shows that prices fell by 1.1% in July, to £214,378, the month after Brexit but since then have recovered and at the end of November were slightly higher than at the time of the Brexit vote.

Shared ownership, Help to Buy and other schemes have helped some people buy their first property without the help of the Bank of Mum and Dad, but even these schemes are not perfect because they involve only owning part of a property or come with an extra loan that has to be repaid at some point.

Unless there is a massive housebuilding programme or a major economic crisis, house prices are unlikely to fall because there are so many buyers trying to purchase each property that is for sale.

Economic forecaster, Howard Archer, from IHS Global predicts that even though there are many threats facing the economy in 2017, the impact on house prices will be muted.

He said: “We suspect that house prices will come under increasing pressure as 2017 progresses and will likely be essentially flat over the year. A shortage of properties is likely to limit any downside for house prices.”

The Autumn Statement has not given enough support for new affordable homes, not offered enough incentives to buyers such as cutting stamp duty and has not tackled the affordability crisis that means most hones remain out of reach for first-time buyers because they are too expensive. That is why WhatHouse? readers don’t think the Autumn Statement has made it easier to buy a new home.