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Reaction to the 2015 Autumn Statement

Budget 2015
Chancellor George Osborne’s plans to generate a revenue surplus and fund the construction of 400,000 new homes, as  announced in today’s Autumn Statement, could be scuppered by the revised Stamp Duty system losing the Treasury around £3.5 billion over the lifetime of this Parliament, warns Chestertons, one of London’s largest estate agents. 

Almost a year on from the introduction of the new Stamp Duty system, Chestertons experts have calculated the change will cost the Treasury up to £750 million in lost revenue this year alone. The new regime has impacted sales over £1.4m, bringing some parts of the market to a virtual standstill, and is having an unwanted impact in lower price brackets as developers find it more difficult to subsidise the development of starter homes and investors switch tack to buy cheaper properties, increasing competition and affordability issues for those further down the property ladder. 

Robert Bartlett, CEO of Chestertons, adds: “We certainly welcome the Chancellor’s renewed focus on the need to build almost half a million extra homes and steps to making home ownership more affordable, but the money set aside for that could well be in jeopardy unless something is done to address this alarming tax shortfall caused by the new Stamp Duty system that’s also damaging large swathes of the house sales market. 

“By ignoring urgent industry calls to review last year’s changes to Stamp Duty, the Chancellor is burying his head in the sand and will likely be in for a shock when the final year’s receipts are counted and he realises how much the new regime is costing the Treasury,” Bartlett continues. “The Chancellor said his new second-homes or buy-to-let levy on top of Stamp Duty would raise £1 billion for the Exchequer by 2021, but extra revenue is completely obliterated by the losses over that same period.

“The dramatic fall in transactions as a result of the new SDLT regime will have a further unwelcome effect on the wider economy. People buying homes typically spend considerable sums immediately thereafter, be it refurbishment, buying white good, furniture, etc. The loss of VAT receipts alone must be considerable,” Bartlett concludes.

Nick Barnes, Head of Research at Chestertons, says: “The Chancellor’s forecasts over the next four years are very finely balanced, and any shortfall in hoped-for tax revenue will force him to find new savings in the form of spending cuts, or he risks missing his targets on borrowing and deficit reduction – never mind his hope of creating a fiscal surplus. The property industry is calling for him to urgently revisit Stamp Duty, perhaps revising rates on a regional basis or introducing a cap.

“Furthermore, increasing Stamp Duty on all buy to let properties by 3% is likely to turn many new and existing landlords away from the sector and reduce the number of homes to rent and almost certainly driving up rents for the millions. Higher rents make it even less likely that those on low or modest incomes will ever be able to raise the deposit required to realise their dream of home ownership, despite new Help to Buy ISAs or capital loans for Londoners that were unveiled today – first-time buyers will still need to find around 5% of the total purchase price as their share of the deposit.”

Barnes adds: “We certainly need more new homes across all price points, to buy and for rent, so the £6.9 billion funding announced for house building today is welcome. But we also need many more practical measures to get these homes off the theoretical drawing board and shovels in the ground. 

“Developers urgently need more land to build on, especially in London, and an easing of planning restrictions and red tape that are discouraging developers of all sizes from delivering more new homes, so the Chancellor must ensure these measures are introduced without delay. There should also be added incentives and innovative new models for the build-to-rent sector. A separate use-class might tempt investors, while the US model that sees prospective tenants effectively rent ‘off plan’ could also work over here. The public sector should also more frequently develop in ‘joint venture’ with the private sector, sharing risks and costs to get schemes underway, then reaping the benefits when the homes come to market.”

Henry Knight, Director of Springtide Capital independent mortgage brokers, comments: “First-time buyers have fuelled increased activity in the mortgage market this year; with its commitment to building more starter homes it’s clear the Government is keen to boost the supply of affordable houses and help London buyers with their first deposit – buyers must also have access to financing to secure these homes. 

“I fear many first-time buyers in particular will suffer from the negative impacts of an EU Directive that will likely mean mortgages become more difficult to obtain. The new Help-to-Buy ISA is finally coming into effect, but with many lenders still yet to announce their products, there are many uncertainties about how these products will work, what sort of value they will offer and how long the incentives will last. The maximum Government top-up of these ISAs will be set at £3,000, which in London at least will not get you very far.”

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