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How will homebuyers and homeowners be affected by the Budget?

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29/10/2018
The Chancellor signalled an end to austerity but what does that actually mean for the housing market?
How will homebuyers and homeowners be affected by the Budget?

Philip Hammond has delivered his Budget, but did he do enough to fix Britain’s broken housing market?

The direct impact on most homebuyers, movers and sellers is limited. First-time buyers will be pleased to see an extension to Help to Buy, exclusively for them, as well as Stamp Duty relief on shared ownership homes.

Landlords will be less cheered by the restrictions on lettings relief on Capital Gains Tax, proving yet another blow.

The bigger picture is one of policy changes that may not be headline grabbers today, such as planning reforms on building upwards, but form an important part of the housing jigsaw.

Here’s what’s changed:

Stamp Duty relief for first-time buyers

Waiving Stamp Duty for first-time buyers was last year’s news, but the government announced it will extend first-time buyers relief to all qualifying shared ownership property purchasers too, whether or not the purchaser elects to pay Stamp Duty on the market value of the property. And it will backdate the relief to 22nd November 2017 so some buyers will be in line for a refund.

Helen Morrissey, spokesperson at Royal London said: “While the extension of this Stamp Duty relief will help first time buyers to get a step on the housing ladder we would argue that more can be done to make the housing market more liquid. While first time buyers can buy a home what of those further up the ladder who cannot afford to either move to a larger home to accommodate their growing families or those looking to downsize. We would urge the government to look at reliefs for those further up the housing ladder if we really want to free up the housing market.”

The government also said it’s consulting on a Stamp Duty surcharge of 1% for non-residents buying residential property in England and Northern Ireland and will publish findings in January.

Help to Buy end date

The Help to Buy Equity Loan was planned to end in 2021 and will end in its current form. A new version will be launched for first-time buyers only between April 2021 and March 2023.

It will only be available for houses with a market value up to new regional property price caps, set at 1.5 times the current forecast regional average first-time buyer price, up to a maximum of £600,000 in London.

Jackie Bennett, director of mortgages at UK Finance, said: “The extension of Help to Buy is good news for first-time buyers with low deposits, who will continue to receive vital support when buying a new-build home until 2023.

“Last year the number of first-time buyers reached its highest level in a decade, boosted by vital schemes like Help to Buy.”

Tax relief blow for landlords

From April 2020 the government will reform Capital Gains Tax lettings relief so that it only applies where the owner of the property is in shared occupancy with the tenant, costing landlords an estimated £470m over the next five tax years. The final period exemption will also be reduced from 18 months to 9 months.

Meera Chindooroy, policy and public affairs manager at the National Landlords Association said: “It’s disappointing to see landlords being targeted again with the reduction in lettings relief on Capital Gains Tax.”

Planning reform

A consultation has been launched on new permitted development rights to allow upwards extensions above commercial premises and residential properties, including blocks of flats, and to allow commercial buildings to be demolished and replaced with homes.

Further investment in housing

  • A commitment of £291 million from the Housing Infrastructure Fund, funded by the NPIF, has been made to unlock 18,000 new homes in East London through improvements to the Docklands Light Railway
  • The British Business Bank will deliver a new scheme providing guarantees to support up to £1bn of lending to SME housebuilders
  • £653 million will be provided to 2021-22 for strategic partnerships with nine housing associations to deliver over 13,000 homes
  • £75 million from the Home Building Fund for St Modwen plc, to fund infrastructure to build over 13,000 new homes
  • The Housing Revenue Account cap that controls local authority borrowing for house building will be abolished with immediate effect in England, and the Welsh Government is taking immediate steps to lift the cap in Wales.
  • The Housing Infrastructure Fund, funded by the NPIF, will increase by £500 million to a total £5.5 billion, unlocking up to 650,000 new homes.

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