The emergency stamp duty holiday activated by the then-chancellor Rishi Sunak in July 2020 enabled families to upsize and relocate.
The Government’s shared-equity scheme, Help-to-Buy, controversial as it was, helped first-time buyers to get on the ladder.
But it works both ways.
The scrapping of interest-rate relief on buy-to-let mortgage repayments and the extra three per cent stamp duty on the purchase of second homes has pushed private landlords out of the sector, drastically reducing the number of properties for tenants in London and driving up rents.
Meanwhile, arguably, the absence of a national council house-building strategy has compounded the homelessness and temporary accommodation crises in the capital.
Next Wednesday, Chancellor Jeremy Hunt will deliver what is probably his last fiscal statement before the general election.
“Housing has been established as a key battleground.”
That fast-approaching deadline, and YouGov polls showing how important housing is to voters, suggests this could be a housing-heavy Budget.
It’s about time, too, given it was noticeable by its absence in the autumn statement.
As James Bailey, UK housing leader at PricewaterhouseCoopers, puts it, “housing has been established as a key battleground” in the race for power.
So, what headline-grabbing announcements should we expect from the Chancellor, and who is likely to be a housing winner or loser after the spring Budget?
Buckle up for another stamp duty holiday
The policy that had the most impact on the housing market in the past decade was George Osborne’s stamp duty overhaul in 2014, which increased the levy on large houses in the expensive South-East.
The unforeseen consequence?
It dissuaded downsizers from moving on and reduced the supply of family-sized homes. Today, in an era of high interest rates and high living costs, it’s another expensive barrier to moving.
“A change to stamp duty would bring the market alive,” argues Polly Ogden, managing director of John D Wood.
“A change to stamp duty would bring the market alive.”
Another stamp duty holiday is more likely than a structural overhaul (even though this forces a spike in prices as households move at the same time). And it’s easy for the Government to reintroduce: the system is already in place following the Covid stamp duty break.
“What we need is a long-term solution which is supply-led,” says Bailey, “but the Government has a short platform, which means any intervention is more likely to be on the demand-side — such as a stamp duty holiday.”
Jordan Gilbert, of KPMG, would like to see stamp duty relief for second-steppers who have not amassed the equity of previous generations and are finding it hard to upsize, while Ogden suggests a tax break for downsizers.
First-time buyers do not pay stamp duty on anything costing £425,000 or below. This is due to drop to £250,000 in March 2025 and could easily be extended.
Rightmove is calling for stamp duty reform, saying only four per cent of homes in London are stamp duty-exempt for all buyers, compared with 71 per cent in the North-East.
Winners: Upsizers, already on the ladder, who want to relocate or buy a bigger house to accommodate a growing family.
Losers: Future generations who watch house prices surge, again.
99 per cent mortgage guarantees ‘will not move the dial’
The Government pledged 95 per cent loan-to-value mortgage guarantees in its 2019 manifesto and is now testing the water with a 99 per cent version — in which buyers need only a one per cent deposit.
Despite being underwritten by the Treasury, this makes the banks jittery in an already uncertain lending climate.
“It addresses deposit affordability but not mortgage affordability,” says Lucian Cook, head of residential research at Savills.
“It doesn’t move the dial.”
“Fundamentally, it isn’t going to stimulate enough demand to entice the housebuilders to start building a lot more homes and does not replace Help to Buy (which ended last year). It doesn’t move the dial.”
Gilbert warns there is risk here too for the borrower.
“Each mortgage offer must be based on that individual’s circumstances and must come with education and stress testing. House prices can go down, too,” he says.
Winners: First-time buyers on a good salary but who don’t have a deposit.
Losers: Those who fall into negative equity if their house price goes down or their financial circumstances change for the worse.
Building on brownfield, again
Michael Gove has already started to trial planning reform ahead of the Budget.
In this middle of this month, the Housing Secretary promised to slash red tape for housebuilders and homeowners extending their homes, prioritise brownfield sites and make it easier to turn shops into homes.
The property industry sneered at these rehashed announcements from a politician who watered down national housebuilding targets.
“The last time we didn’t have a crisis was when the state directly intervened.”
For Jackie Sadek, regeneration expert and former government adviser, the only solution to the homeownership affordability, rental, temporary accommodation and homelessness crisis is a national plan to build more council houses.
“The last time we didn’t have a crisis was when the state directly intervened, which ended in the late Seventies. Unless we get a wholesale structural shift back to the supply of council housing, the market will continue to be thoroughly broken,” she says.
Winners: Homeowners who want to build a bigger kitchen or extra bedroom, easily.
Losers: Tenants paying high rents due to the fundamental lack of homes. Homeless families forced into hostels and unsuitable temporary homes because of a lack of social housing. Prospective homeowners who can’t afford to get on the ladder due to a chronic supply-demand imbalance.
Tenants vs landlords: who will Hunt help?
Jeremy Hunt is expected to use this Budget to court the young voter and step outside the Conservatives’ core voter base of homeowners.
While rental growth in London has slowed from last year’s highs, rents are still expected to rise by 5.5 per cent in 2024.
He could include an update on the Renters Reform Bill to stop no-fault evictions — which is currently going through amends.
The Chancellor is stuck between a rock and a hard place. To really help renters he needs to drastically increase the supply of private rental homes. To do this he needs to also encourage good private landlords back into the sector. But a tax break for buy-to-let investors will not sit well with tenants.
In reality, he needs to balance the offering to both sides: an incentive to landlords and stricter regulation to protect tenants.
Winners: The small landlord relying upon bricks-and-mortar as income. The young professional who needs more choice and to pay a lower rent. Homeless families and individuals living in squalid and cramped B&Bs and hostels because there is not enough affordable stock for councils to access.
Losers: London! Inaction will see more young tenants, key workers and talent leaving the capital to rent in the far corners of the commuter belt or even relocating to regional cities.
