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London Property Market 09 July 2015

Bold Budget aims to unlock home ownership for generation rent

The Chancellor has signalled the Government's intentions to boost home ownership – by committing to unlock development, improve access to mortgages and deposits for first-time buyers and reform inheritance tax to allow people to pass on more substantial inheritances to their family – in a relatively bold Budget welcomed by Chestertons, one of London's leading residential agents.

Other announcements in George Osborne's statement will impact the rented sector, with Right-to-Buy extended to those in Housing Association homes, and social housing tenants earning more than £30,000 – or £40,000 in London – being told to pay market rents or move out. The Chancellor announced he would retain mortgage interest relief on buy-to-let properties but restrict it to the basic rate of income tax payers, phasing in the withdrawal of higher-rate relief over four years, starting in 2017.

Nick Barnes, head of research at Chestertons, says: "There aren't too many surprises here, with many of the policies having been trailed in the Conservatives' election manifesto. It was expected that there would be an emphasis on boosting home ownership and helping people get out of the rented sector and on to the property ladder, which will be a welcome boost for many.

"Likewise changes to inheritance tax are also welcome, as for most people the family home is the main source of equity, and previously many average households, especially across London, have typically suffered a 40% reduction in their inheritance largely because of inflated residential property prices. This change should allow people to leave a more substantial legacy to their loved ones, which will mean easier access to the property market for many.

"One real test of the Chancellor's latest policy package will be in delivering on the Tories' manifesto pledge to build at least 200,000 new starter homes for people aged below 40 by 2020," Barnes continues. "The Government has said it is committed to bringing more publicly owned land forward for development, there's a new £100m fund to encourage small builders into the developer market, and further reforms to the planning system are in the pipeline."

Robert Bartlett, Group CEO of Chestertons, comments: "It is fair to say that the immediate post-election property market surge that some pundits predicted would result from the Conservatives achieving a majority for the first time since the 1990s has not materialised – especially in London, and most notably absent in prime central areas.

"This Budget is the Chancellor's first opportunity to do something about plateauing markets and the increasing numbers of would-be buyers finding themselves unable to transition from renting to owning their own homes. To that end there are some encouraging measures in this Budget, not least the commitment to helping first-time buyers and the goal of delivering more new homes by freeing up public land, streamlining planning and incentivising developers. A better supply of good quality homes is what the lettings and sales markets both urgently need, especially in London, so we look forward to seeing the positive impacts these policies can bring."

Cory Askew, Chestertons' Area Director for Canary Wharf and Docklands, adds: "While the thriving buy-to-let sector will not be ecstatic about the tapered removal of tax relief on mortgage interest payments, the raft of measures around business – particularly the reduction in Corporation Tax and the eventual removal of the bank levy – will be great news for the financial services sector and, by virtue of its importance within it, the wider British economy."

Henry Knight, of Springtide Capital, Chestertons' dedicated mortgage brokerage, adds: "We have seen a tightening of the mortgage market with successive legislation changes aimed at limited lenders' exposure, and this has had a cooling effect on the market in recent months. It is encouraging to note that many lenders are starting to approach decision-making policies with a new degree of flexibility. We'd like the main high-street lenders to follow this lead, but I believe we're now seeing improved access to suitable mortgages, which should have positive long-term effects.