24 Nov 2017
Author: Stephen Breen
Housing was certainly at the centre of the latest budget announcement, with the Chancellor promising funding for house building, upping the council tax premium for empty properties and slashing stamp duty for first time buyers.
A £44 billion housing package is proposed to increase the number of homes being built from 217,000 to 300,000 a year. However, only £15.3 billion of this will be new money. Most of the cash will go to unlocking developments which have stalled or encountered problems. Grants will be available for land remediation and infrastructure building, while loans for SME building companies will be on offer. A new £1.1 billion Land Assembly Fund has also been proposed which will allow the Government to work on new settlements and urban regeneration schemes with developers.
The bulk of money will go to regions where there is the highest demand – starting in Oxfordshire where 100,000 homes are to be built by 2031 in exchange for £150,000 million over five years for affordable housing and infrastructure costs. Other projects taking up a large portion of the funding will be along the Cambridge – Milton Keynes – Oxford corridor where the new Varsity railway line linking Oxford and Cambridge is to run.
Other deals are under negotiation in Greater Manchester, Leeds, the West Midlands, West of England and the South East.
The Chancellor has also promised more land for housing which will be achieved by planning reforms, whilst protecting the green belt. Details of how this is to be achieved have not been provided as yet.
To motivate owners of empty properties to sell or rent, the Chancellor has doubled the council tax premium that can be charged on homes that are empty for a long period of time.
Currently Councils across England can charge up to 50% more Council tax where a property is unoccupied and ‘substantially unfurnished’ for two or more years. However, figures reveal that the premium has only been applied to 60,516 properties in the current year. Figures also reveal that 79,347 owners of properties which have been empty for less than two years have received a discount on their council tax this year, with 39,313 homes entitled to a full discount.
There have been no figures suggested as to how many properties are likely to be sold or rented out as a result of the changes, as yet.
Stamp duty changes
For properties valued up to £500,000, first time buyers now won’t pay stamp duty on the first £300,000 of the property price. Between £300,000 and £500,000, the standard 5% rate will apply. For those few first time buyers purchasing a property over £500,000, the standard Stamp Duty rates will apply (5% up to £925,000 and 10% thereafter). The changes apply to England, Wales and Northern Ireland.
Ordinarily stamp duty on a £500,000 property would be £15,000. First time buyers will now have to pay £10,000 on the same property (5% of the difference between £300,000 and £500,000), saving them £5,000. However, few first time buyers part with half a million pounds for their first property and realistically, the saving made is likely to be far lower. The average house price in England is £243,945 which would attract a saving of £2,378.90, and a typical first time buyer purchase will mean the saving is more likely to be just £1,660.
Around 80% of first time buyers will be entirely exempt from stamp duty as a result of the change, and brokers estimate that around 98% buying in the North East will escape the tax altogether.
Whilst the Chancellor acknowledged that stamp duty needs further reform, he seemed convinced that the stamp duty break would give the market a much-needed boost, particularly in areas where sales have been slow such as London and the South East. But stamp duty is just one problem that first time buyers have to face if they want to get a foot on the housing ladder. Most mortgages require a minimum 5% deposit which means finding £12,197 for the average house, or £24,178 if you’re buying in London. On top of that, first time buyers in the Capital, where properties are priced far higher, will still have to find £9,178.40 for stamp duty on an averagely priced property (5% of the difference between the average £483,568 selling price and the £300,000 exemption). On a more typically priced first time buyer property at the lower end of the market in London, it is estimated that 85% of first time buyers will be exempt from the tax.
The Office for Budget Responsibility has predicted that the stamp-duty break may push up house prices during 2018, although only by a small amount. Consultancy Capital Economics has also predicted a rise of 1 or 2 per cent, spurred by sellers believing that first time buyers now have more cash to splash.