As Phillip Hammond presents the first look at the UK government’s economic plans this year, here’s what those with real estate assets should look out for.
What: The UK Budget
When: Wednesday March 8th
Where: House of Commons, Westminster, UK
Always a highly anticipated event, this Budget will also have increased importance. Not only is it the first of 2017, but it’s also the final Budget speech before Prime Minister Theresa May triggers Article 50 and begins the formal process of withdrawing the UK from the European Union.
What’s more, it will be the last Budget held in the spring time, after Chancellor Phillip Hammond chose to have just one annual economic statement in the autumn from November 2017.
When Mr Hammond presented his first overview of the government’s economic plans since becoming Chancellor, it proved to be a significant one for property investors. Most notably, he promised to invest £3.7 billion into new housing of “all types”, while also promising to scrap letting agent fees for tenants. Both announcements were positive news for Britain’s growing build-to-rent sector.
So what can we expect this time around?
More pledges to drive build-to-rent investment?
Over the last month, the government has made several commitments to do more to help increase construction levels in the UK’s private rented sector (PRS).
Prime Minister Theresa May has pledged to include the country’s rental population at the heart of her plans to “fix the broken housing market”.
Will Mr Hammond talk about the allocated expenditure that will help to put these plans into action?
With homeownership becoming more unaffordable for many, in addition to the increase in young workers that are actively renting their homes as a lifestyle preference, the government is aware that more investment is needed in the build-to-rent sector of the market.
On February 7th it released its much anticipated Housing White Paper, in which it outlined its proposals to drive the development of more homes of “all different kinds of tenure – from outright ownership, shared ownership and renting”.
The government looks set to overhaul planning regulations, allowing local councils to build more purpose-built rental property in key areas. It’s also expressed its intention to draw up plans that will enable tenants greater access to longer-term tenancies.
A potential stamp duty reform?
After releasing a new report detailing how much first time buyers are spending to make it onto the property ladder, the Yorkshire Building Society has called on the government to consider making stamp duty a sellers’ tax, rather than something buyers have to pay.
Rising property prices are prompting more first time buyers to buy homes that are above the stamp duty threshold. 74% of these buyers paid stamp duty in 2016, a significant rise in the 53% that paid it in 2006.
By making the tax something sellers must pay, rather than those moving into their properties, Yorkshire Building Society believes it will help those trying to acquire assets for the first time, but also those looking to move up the ladder.
Andrew McPhillips, Chief Economist of the Yorkshire Building Society, commented: “Levying the charge against sellers rather than buyers will help to reduce costs for first-time buyers, helping more people to get on the property ladder.
“It would also help those moving up the property ladder, enabling them to move to a more suitable property and potentially freeing up smaller homes for first time buyers to purchase.”
Will the Chancellor take note of these calls during his Budget speech?
Away from property, here are a few other things economists and analysts believe Mr Hammond may announce:
- A scaling back of borrowing forecasts? The UK’s economy has grown faster than many financial experts forecasted post-Brexit. While the Chancellor is likely to borrow more over the next five years than before the referendum, he could announce that borrowing levels might actually be £12bn less than he first forecast at November’s Autumn Statement.
- Adjusted business rates for smaller businesses? Ahead of impending reforms to business rates, changes that have the potential of hitting smaller businesses with significant tax hikes, Mr Hammond could make some adjustments to ensure those smaller organisations are less exposed to the increases.
- Increased spend in health and social care? The healthcare industry has made numerous calls on the government to increase investment in the NHS in recent months, particularly in terms of social care. The Chancellor may use savings made in other areas to boost overstretched local health and social care services.