Last week I reported on the market situation for first-time buyers following Phillip Hammond’s announcement to scrap their stamp duty; and the week before about the Rochester regeneration project which will bring 1,400 new homes to the area. All was looking positive for those looking to get on the property ladder in Medway. Well, a lot can happen in a week and it seems all that glitters may not be gold…
As part of his budget Mr Hammond also announced a range of new budget measures designed to boost property development, which set a target of 300,000 new properties being built every year. Made up of developer loans and guarantees, the budget measures should take effect by 2020. Fabulous, I hear the first-time buyers cry. Well hold your horses…The Office for Budget Responsibility (OBR) don’t think his figures quite stack up and have said that they are not making any changes to their new home forecast based on his budget policies. “It is difficult to distinguish the effect of changes in the planning system from the more general recovery in housing market activity,” the OBR said.
Records show that around 217,000 new homes were built in the year 2016-17. But the experts remain sceptical that the plan can boost the build of new houses back to levels last seen in the 60s. Robert Joyce of the Institute for Fiscal Studies said the target of 300,000 homes a year, should be “taken with a pinch of salt”. Not very reassuring…
So what about Mr Hammond’s stamp duty scrap? Well there has been a surprising amount of backlash to the Chancellor’s tax cut, which was designed to save first-time buyers money. Many believe that it will in fact push houses prices up, therefore only benefitting those who already own homes. The OBR predict the property price rise will be about 0.3%, which will happen mostly during 2018.
Stamp duty was worth more than £8bn to the government in 2016, and the changes will cost the Treasury an estimated £3.2bn over the next five years, so you’d would think they would have a good steer on the impact. But what is the impact for buyers in our area?
As I said last week, the average price for a 3-bed terraced house in Medway is £242,457 which equates to a saving of £2,349 for first-time buyers. But with typical first time home prices in the South East being the 2nd highest in the country, first-time buyers will undoubtedly feel the impact of that 0.3% price rise more than others.
The news isn’t great on the buy-to-let front either. According to Mortgage Solutions, London and the South East could be hardest hit by a potentially damaging downturn in the buy-to-let market, likely to be brought about by all the regulation and tax changes over the past couple of years. While ratings agency Standard and Poors, predict a dramatic fall in loan values amid tougher lending rules, stamp duty surcharges, and the removal of tax perks for landlords. All of which suggests investors will be required to provide higher deposits. And with property prices already high in the South East, some say it may be less economically attractive to investors.
Also, the budget removed the indexation relief for landlords owning properties in companies. This means that when landlords who own the property in a company come to sell, they can no longer use inflation as a basis to claim relief against capital gains tax. All small stuff that adds up.
Personally, I feel that the budget is continuing an attack on buy to let landlords over the past couple of years. No matter, property is still a great investment if you are sourcing great properties and putting quality tenants into them. Compared to leaving your money in the bank, or the stock market, investing in property still affords many advantages.
On the plus side, there were some smaller caveats to the budget that are really positive, particularly for property investors. Several consultations have been initiated. The first of interest is exploring the barriers to landlords offering longer, more secure tenancies; and a second is to look at ways to encourage planning permission for schemes with a high number of homes for first-time buyers or affordable rent.
I’m really intrigued to hear your views on it all. If you want to chat about stamp duty, buy-to-lets or anything property related, email me at firstname.lastname@example.org, connect with me via LinkedIn or join our discussion group over on Facebook.