The chancellor has delivered her long-awaited Budget, with little announced to ease the concerns of the housebuilding industry.
Developers will be impacted by a decision to increase the minimum wage but will welcome a decision to halt plans to converge two rates of landfill tax.
The most notable announcement was the introduction of the so-called “Mansion Tax, which will see all properties worth over £2million subjected to a new property tax of between £2,500 and £7,500.
Here’s how the Budget was received across the industry:
Melanie Leech, chief executive of the British Property Federation, said: “There wasn’t a single thing said in the chancellor’s speech that wasn’t leaked in its chaotic build-up. However, the lack of surprises doesn’t hide the disappointment that many in the development industry will feel after today. Whilst she spoke positively about the importance of business investment and maintained full expensing and the headline rate of Corporation Tax, there was little to cheer from an investor perspective. Indeed, confirmation of the large property business rates surcharge will impact critical national infrastructure like logistics businesses and priority sectors identified in the government’s own Industrial Strategy.”
“While it was always going to be a challenge for the chancellor to both balance the books and support economic growth, it is disappointing that there was nothing introduced to alleviate acute development viability issues. Overall, no surprises, but nothing to cheer either.”
Phil Hooper, CEO of Close Brothers Property Finance, said: “It’s extremely disappointing that the government has missed an opportunity to support the housebuilding industry through a new equity loan scheme.”
“The government is holding up the Mortgage Guarantee Scheme as its flagship policy to support first-time buyers, but the numbers tell a different story. Since launching four years ago, the scheme has accounted for just 1% of all new mortgages.”
“The downturn in the new homes sales market is the single biggest issue for SME housebuilders at the minute and it’s preventing them from being able to scale up their output. We’ve seen volume housebuilders take matters into their own hands by launching their own versions of equity loan schemes. Unfortunately, this isn’t an option for SMEs who don’t have that kind of financial firepower. SMEs have always been at a competitive disadvantage to the PLCs and the gap between them is only going to grow wider at this rate. Without targeted intervention, we risk losing the very businesses that are building the high-quality homes that the country desperately needs.”
Mark White, managing director of SME housebuilder Bargate, said: “The Budget itself and the early leak from the OBR are utterly extraordinary. Such a wishy washy Budget signals it’s almost time for panto season.”
“The chancellor has totally ignored the housebuilding sector and fellow cabinet colleagues who say they want to ‘get Britain building again.’ This was the perfect time and opportunity to get the market moving and do something positive around Stamp Duty and a new version of Help to Buy.”
“Why didn’t the chancellor seize the opportunity to introduce some easy wins? With the NPPF and Planning and Infrastructure Bill progressing through Parliament, the Autumn Budget would have been the ideal platform for Reeves to recognise the vital role housing can play in the health and growth of the UK’s economy. The Labour administration’s positive planning changes have to be met with demand side assistance.”
Sophie Horgan, director of Horgan Homes, commented: “I’m afraid any confidence in this Budget and this chancellor was fatally undermined when Rachel Reeves performed her screeching U-turn over tax rises two weeks ago.”
“It was clear evidence that this is a chancellor who puts political expediency ahead of economic integrity.”
“As a result, today’s budget is a sticking plaster of a statement which will do nothing to restore faith in this chancellor.”
“I wanted to see clear action to prioritise the small housing sites and SME constructors who are the backbone of housebuilding in this country. Things like cutting red tape and affordable housing obligations around small sites of 20 homes or fewer would have made a huge difference.”
“I heard little which will help first-time buyers achieve their housing dreams and even less about creating the sort of government-backed finance deals which would enable smaller builders to press ahead with projects with real confidence.”
“We have heard plenty of talk from this government about getting Britain building, but that simply won’t happen unless the army of SME builders is supported to create the homes we know people want.”
On the Mansion Tax, the industry said:
Lucian Cook, Savills head of residential research, commented: “After what must have been the most prolonged exercise in kite flying in the run up to a Budget, the introduction of an annual tax surcharge for properties worth over £2million, at levels somewhat lower than many will have feared, is probably the least worst outcome for owners of prime property.”
“And with the uncertainty in the run up to the budget having already impacted prices, the impact on the market will be much less severe than it would have been in the event of an open-ended mansion tax.”
“However unwelcome any tax increase, the certainty which this provides will allow buyers and sellers to formulate plans which have been put on hold over recent months. This is likely to underpin a short-term pick up in market activity, especially given the breathing space offered by a delay in implementation whilst the valuation exercise is conducted.”
“Over the longer term, the measures are likely to act as slightly greater incentive for older home owners to downsize and, in some cases, heavily mortgaged owners of high-value homes to move to a less valuable property pushing some demand out of London into the commuter zone. However, this impact will be tempered by an ability to defer any charges until sale or death which should prevent a rush of stock coming to the market.”
“At the very top of the market, the policies themselves are not big enough to warrant a change in the demand supply dynamic of the central London market.”
“All of this, combined with the fact that some of the risk at the top end of the market has already been priced in, is likely to mean that, overall, any further impact on prices is relatively modest, although it is likely to be a further drag on the recovery of the prime market. However, it is likely to have a disproportionate impact on second home markets which are already dealing with an increased Stamp Duty surcharge and the doubling of council tax in most cases.”
Olivia Harris, chief executive of Dolphin Living, said: “The introduction of a “Mansion Tax” on homes above £2million offers an opportunity to support affordable housing delivery across London, but only if local authorities have the ability to retain the revenue to spend on affordable housing delivery. As such, the government urgently needs to reconsider its position of directing this additional revenue back to the Treasury and ensure this tax on expensive housing is redirected towards delivering more affordable housing in locations where high value housing is prevalent and affordability challenges are greatest.”
Jason Tebb, OnTheMarket president, commented: “This will hit London and the South East hardest, where 80% of £2millio+ homes sit. The market is now being faced with distorted buyer behaviour, price stagnation at the top end, and a ripple effect across the wider market. Ironically, it could even undermine the very tax revenue it aims to raise as transactions drop in response.”
“Those who will be hit hardest are retirees or long-term owners who bought their homes decades ago. Their property value may have doubled or trebled, but their pension income has not. They could now be facing tax bills that exceed their disposable income.”
“The market impact may well be a “ceiling” effect just below the £2m mark with sellers forced to reduce asking prices to make the property attractive to buyers avoiding the surcharge. This was the effect of historic Stamp Duty “ceilings” in which properties above £250k saw a straight jump from 1% to a 3% rate, so buyers were offering £249,999 on properties on the market for as much as £270k.”
“Current Council Tax bands remain based on valuations from the early 90s (1991). To implement this surcharge, the Valuation Office Agency must revalue high-end properties in the context of today’s market. This is complex, subjective, and likely to lead to a massive spike in appeals and litigation from owners challenging their valuations to get under the £2 million threshold.”
