The government has used the budget to introduce hard impacting policies to stamp duty, first-time buyers, landlords and the wider buy-to-let market.
We asked this week’s Marketwatch panel what they would like to see from the Budget 2018 in terms of mortgages and the wider housing market.
Housing is high on the political agenda and as is the case with any Budget, various rumours are circulating as to what measures might be included, which would impact the property market.
The proposal that has caused the most debate is the one mooted by prime minister Theresa May in her speech to the Conservative party conference, where she suggested that foreign buyers could face a surcharge of up to 3% on top of stamp duty.
This seems like an unhelpful move that would simply deter foreign buyers who are not responsible for driving up UK property prices.
It is unlikely to solve the housing crisis, whereas the building of more social housing in particular would help improve the situation.
There are also rumours that landlords could receive capital gains tax relief if they sell a rental property to a sitting tenant who has lived in the property for at least three years.
This is an interesting idea, which is worth exploring further, and could appeal to landlords who are thinking about selling because of tougher tax and regulatory changes.
While we are on the subject of buy to let, the sector has come under sustained attack over the past few years so what would be welcome is if chancellor Philip Hammond left well alone for now.
Landlords are an easy target but if they exit the sector in their droves, it is those tenants who are privately renting who stand to suffer.
It’s always hard to predict and forecast what could be coming down the line in a Budget, let alone when the political landscape is so full of turmoil and Brexit looms large.
Despite the fact that stamp duty land tax has been an area subjected to an overhaul and further changes it looks set to be a talking point once again.
The 3% surcharge introduced on additional homes was designed to dampen the buy-to-let market and a further surcharge has already been floated, this time for foreign buyers of UK property.
Theresa May has suggested that the funds raised would be used to combat rough sleeping, so is a measure unlikely to meet with widespread criticism.
Help to Buy has been a key issue in the housing market and there’s already a lot of talk about what is likely to happen once the original equity loan scheme comes to a close.
Nobody involved will want to edge too close to the 2021 deadline without more understanding around its future.
Developers will understandably want to understand the role it has to play in their planning, so it’s possible we will see it extended. That may come with some paring back of the scheme’s availability, perhaps to first time buyers only.
Other interesting proposals include the removal of CGT for landlords selling to a long-term tenant in a bid to incentivise supply of property and to help the tenant too.
Many in our industry will no doubt feel that landlords should be given some more slack, given the raft of change in recent years, although I’m not at all expectant that we will see reversal in that area.
From a broker’s point of view I expect this budget to be a bit of a treading water affair.
The government has got a bit of money to play with but with the pressures they are facing with things like NHS funding and Universal Credit I don’t see that they will do much for property or lending.
Also, the changes they have wrought in the rental market are having the effect they wanted.
Fewer buy-to-let purchases, allowing more property to be available for first-time buyers, increased revenue from the additional stamp duty levy and, now starting, increased tax revenue as the sliding scale on mortgage interest relief has begun.
From the government’s perspective it is all going well, so why change it?
That said, there are a couple of things we do not want to see in the budget: Anything to harm landlords any further than they have been, and any increase in stamp duty.
These are the things we do want to see in the budget:
- Against all hope, we would like to see the stress test (introduced by the PRA and not the Treasury admittedly) for BTL mortgages eased slightly. It is too high and creating a problem for the biggest single property market in the UK – London.
- Additional stamp duty reduction. We understand why the government brought this in, and much as we might not like it, many in the industry agree with the principle. But it could be capped. The reason for this is to make it fairer across the country.
- An extension to HTB to prevent the rate of new-build houses to curtail rapidly.
- A recently whispered scheme to allow landlords to sell a rental property to the respective tenants with tax breaks regarding capital gains tax (CGT), so that an element (if not all) of the CGT payable can be gifted to the tenants as deposit for the purchase. Exactly how this would work/be policed we don’t know as people can inflate or deflate the purchase price of a property depending on how it may help them financially.