How will this year’s Budget affect the property market?

    12 March 2020

    So, there is to be no mansion tax, no extra bands to council tax and neither is there to be any cut to stamp duty.   In fact, there is to be a two percent surcharge in stamp duty on overseas residents who buy properties in Britain. Few will cry for the overseas investors who have been piling into UK property, but hopefully this levy will not fall on people who are moving to Britain to live and work here, as it will be one more barrier to the recruitment of overseas talent.

    The ambitious rethink of property taxation, which was floated when Sajid Javid was still Chancellor, has been set aside as Rishi Sunak was forced to prepare a Budget at double-quick speed with the additional complication of coronavirus.  Perhaps it will resurface in the autumn – there is certainly a need to look at stamp duty. But for now, the most eye-catching property measure in the Budget is the announcement of an extra £1 billion to help replace combustible cladding on residential buildings over 18 metres high – and extending to all types of dangerous cladding, not just Aluminium Composite Cladding (ACM) as previously announced.

    This is an issue which I wrote about here last week and which will come as an immense relief to many hundreds of flat-owners – from those in affordable homes to multi-million penthouses. There will also be some relief in flood-prone areas that the flood defence budget is to be doubled to £5.2 billion between 2021 and 2027.   Flood defence has been the Cinderella of infrastructure spending for rather too long – and shows every time it rains. There will need to be change of culture at the Environment Agency, however, to make sure the money really does go on protecting homes and not on creating new habitats for wading birds.

    As for boosting home-ownership – a traditional Tory heartlands issue – there is not a great deal in this Budget, at least not for the mass market. George Osborne’s Help-to-Buy scheme, it seems, will end as planned in 2023 without anything to replace it.    That is a good thing – it was supposed to be a short-term measure to kickstart housebuilding after the 2008/09 crash, but like many subsidy schemes seemed to get stretched indefinitely as housebuilders and buyers became addicted to it. Rishi Sunak did, however, announce £12 billion for affordable homes – some of which will presumably be going towards shared ownership schemes for buyers who could not afford a home on the open market.

    There is £400 million for building on brownfield sites and a £1.1 billion Housing Infrastructure Fund to help housebuilding in three areas: Manchester, South Sunderland and South Lancashire – enough, it claims, to pave the way for 69,620 new homes. Of greater relevance in the long term is a promise to rethink the planning system from first principles.

    There is little detail on this yet – a white paper is promised for the spring – but it is suggested there will be greater government intervention in forcing councils to make land available for new housing. Since David Cameron became Prime Minister in 2010 planning policy has come full-circle – one of Cameron’s first moves was to abolish regional planning bodies and hand more power to local councils.   Now, that power is being taken away again. That is not necessarily a bad thing, as councils can be nimbyish about new homes. But it does mark a significant shift of power away from Tory councils in the shires.

    The positive thing, from the point of view of Conservative party unity, is that there are fewer Tory councils to upset than there were a year ago: a number of councils fell to the LibDems when the Conservative vote was at a low ebb last spring.

    There is the perennial promise to increase house-building: from 240,000 in 2018/19 to 300,000 a year by the mid 2020s. How the government plans to achieve this isn’t entirely clear.  The planning system isn’t the only problem. Significant numbers of small building companies have gone out of business or been gobbled up by larger companies in the past two decades, leaving housebuilding ever more in the hands of a few large firms who stand accused of building at such a rate as to keep prices high.    Moreover, housing associations have proved to be far more reluctant to build new homes than were the councils who dominated social housing until the 1970s.

    It is far from clear how either of these matters can be resolved in order to increase house-building. Perhaps the promised white paper on the planning system will provide some answers.