In his Budget Hammond announced a raft of measures to intended to tackle the housing crisis. Aside from slashing stamp duty for first-time buyers (FTBs), the chancellor also introduced a range of supply-side moves in the form of £15.3bn of new financial support – taking the total amount committed to capital funding, loans and guarantees to at least £44bn over the next five years.
However, IMLA’s Williams was less than impressed. “A solution to the housing crisis was widely expected to be the main event in the chancellor’s Budget, yet the measures announced lacked the scale of ambition to really solve our housing problems,” he said.
“The political resolution to improve prospects for aspiring homeowners that has seen stamp duty abolished for the majority of first time buyers will be welcomed by many but in practice it may simply inflate house prices even further,” he continued.
Indeed, the Office for Budget Responsibility (OBR) has warned that the stamp duty cut is likely to inflate property prices and mainly benefit those who already own homes.
“The reasons for this are twofold,” continued Williams, “firstly, sellers are likely to take advantage of the buyer’s newfound purchasing power and seek to capture higher prices than they might otherwise achieve. Secondly, as we know from previous changes, we will see some price distortion among properties around the £300,000 threshold (£500,000 in London), where demand will be at its highest.”
“Ultimately, there is a real risk that we will see a stoking up on the demand side at a time when there is already a severe imbalance in supply,” he added.
What about supply?
Although Williams acknowledged that the government is “working hard” to boost supply, and is “making progress”, he also noted that the 300,000 more homes promise has slipped out to the mid-2020s and was based on net additions rather than newly built homes.
“It is encouraging to see recognition of the need for a diversity of supply, including local authorities, and to see more focus on land holdings and garden towns. It was also a relief to see no more punitive taxation for landlords, though we note the planned consultation on longer term tenancies,” he said.
In an effort to address the supply shortage, the chancellor also announced an “urgent” land bank review to examine the “significant gap” between the number of planning permissions granted and the number of homes built.
Yet, despite pledges for more investment and regulatory shifts, Williams argues that the Budget just was not bold enough: “Summing up, an underwhelming sense of déjà vu remains. In every Budget new housebuilding pledges are made, yet supply remains too low and prices unobtainable.
Williams added: “When it comes to the success of the housing aspects of Hammond’s latest Budget, the devil will be in the detail and in moving forward at speed. The clock is ticking ever louder.”