Yesterday the chancellor announced a number of measures in the budget to try address the problems in the housing market. These included plans to increase house building by helping small developers and an aim to increasing house building to 300,000 new homes a year. Measures which go to the very route of the housing problem and which should be welcomed by all. The measure to enable councils to increase council tax on empty homes is also very welcome but probably doesn’t go far enough. Surely its a national scandal that property investors leave residential properties empty for long periods, holding them just as an investment, when there is such a shortage of housing – arguable there should have been a rising scale with properties empty for over a year charge 200% or even 400% council tax to discourage this practice.
The head line in the budget however is the stamp duty relief for first time buyers allowing first time buyers to purchase property up to £300,000 free of stamp duty. Is this good news and if so for who? Certainly it will do nothing to sort out the housing problem which is caused by years of low house building and a shortage of properties against a background in increasing numbers of families in the UK. So who will benefit? On the face of it it would appear to be good news for first time buyers who are struggling to raise a deposit. However outside of London and the home counties the average price paid by a first time buyer is £160,000 (£194,000 in the South West) meaning under current rules the stamp duty relief would be £1,400. Only the wealthiest first time buyers will benefit from the full relief on £300,000 perhaps not the intended target for the government? But as with other government measures aimed at addressing the problems for first time buyers it often doesn’t work the way its intended. The measure does nothing to address the shortage in housing and by helping one group it simply displaces other buyers who will not be eligible (for instance a young couple where one may have previously owned a property). The result I expect, as with previous measures such as help to buy, will be to increase competition and hence prices – the end result is existing home owners and property investors will benefit from rising values of their homes. Is this really the best the government can do?
There is another problem these measures fail to address and that is the mis-match between properties and occupants with many living in houses that are too big for their requirements and others living in the wrong locations for their needs or their jobs. For most the biggest single cost item when moving is the stamp duty and this is a significant barrier to moving and relocation. An immobile workforce is not good for the economy (particularly with the inevitable changes with Brexit) and people living in homes that are too big is not the best way to use our precious housing stock. The government have missed an opportunity here which is a pity – they could have done so much more. On a brighter note – if you are looking to sell we have already seen an upsurge in first time buyers looking to buy and take advantage of the stamp duty changes so if you are looking to sell and move give us a call to find out how we can help.