Following John Healey’s first Budget announcement, Sarah Bush, Head of Residential at Cheffins, questions whether the measures go far enough to stimulate the property market, arguing that the focus on supporting first-time buyers through new-build homes fails to address the wider need to kickstart housing transactions.
Read her full reaction here:
Sarah Bush, Head of Residential at Cheffins says:
“It is a relief that the Budget has passed today without any major sweeping reform when it comes to the property market. However, what we would have wanted to see was measures which would kickstart the sales market. This didn’t happen. It became a flotilla of small measures which would sting some, landlords and savers for example, but not impact the majority.
The Your First Home scheme is simply a moderate rebound from the Conservative’s Help to Buy Scheme. Currently, it’s not clear who the biggest winners will be out of this scheme – first time buyers or developers. As the scheme is only applicable to new homes, the Your First Home scheme will not light up the rest of the property market. Should it have applied to second hand homes too, it might have helped to spur on chains throughout other brackets, however, I forecast that all this will do is help developers get more new home sales over the line. In addition, for the scheme to actually help people onto the property ladder, we need the availability of new homes at affordable levels, which are in short supply throughout much of the country. Without the homes, or the land to build them, or the planning reforms to allow these developments to be built, this looks to just be a vote winning move from the Chancellor. The announcement to support the build of council housing only goes so far, we need relaxation of measures for private new build developments for this scheme to make a true impact.
While the deposit levels required as part of the scheme are lower than those on Help to Buy, it leaves behind a larger mortgage. As the housing market remains unpredictable, how can buyers using the scheme ensure that they will be able to pay back the loan? It is crucial to remember that the equity contribution is a loan, it is not a gift. In the days of steady house price growth, buyers could have taken confidence that they would be able to pay off the government loan incrementally or at the end of the five year term, thanks to the growth in their property’s value. However, taking into account current global economics, there is no guarantee that these new homes will go up in value, potentially leaving those who have used the Your First Home scheme needing to either remortgage or find the cash to pay the government back.
When it comes to the additional four per cent tax on rental income which landlords are now facing, this is disappointing. These two measures combined have created a scenario where the government is robbing Peter to pay Paul. Another financial blow to landlords could lead to some looking to exit the private rented sector, leaving a lack of properties available to rent and therefore pushing up prices. This will inhibit people’s ability to save for the 2.5 per cent deposit for the Your First Home Scheme.
In spite of this, it could have been a lot worse. The mansion tax threshold could have been reduced to £1.5 million which would have proved problematic for the higher end of the market and there were concerns of sweeping reform to council tax.”
To view Cheffins' property services, please visit: https://www.cheffins.co.uk/residential.htm