Property at centre of Government growth strategy

budget 2013Chancellor George Osborne has put the property market at the heart of the Government’s plans for economic growth.

In this week’s Budget he unveiled two schemes aimed at getting the sector moving positively once more.

The Help to Buy scheme will allow all purchasers to put down a 5% deposit on a newly-built home from April.

A maximum of 20% of the cost of the home will be funded by a shared equity loan, financed by the Government. This will be interest-free for the first five years.

The second measure is the new Government mortgage guarantee scheme which will run for three years from the start of 2014.

It will be used to support £130billion of mortgages for old and new homes.

Ian Fletcher, director of policy at the British Property Federation, said: “This is a strong package of help for housing. Annual transactions are half what they were and that has a knock on consequences for all those parts of the economy that rely on people moving. Helping people needing a deposit has for some time been cited as the missing piece of a coherent housing policy and is therefore welcome.”

Stephen Noakes, Mortgage Director at Lloyds Banking Group, said: “We are very supportive of innovation in the housing market and believe that the mortgage guarantee scheme, will give a much needed boost to the housing market and most importantly address the issue of accessibility.

“Since the launch of the Government’s Funding for Lending scheme we have seen mortgage rates hit an all-time low, really making a difference to affordability. These proposals will, just as importantly, address accessibility, and provide a genuine solution to the challenge of raising a deposit. Working together these two schemes will get more people on and moving up the property ladder.

“Crucially, this scheme will not only help first-time buyers but also second steppers, a key segment of the housing market that is also in need of more support and attention. Our recent report from Lloyds TSB indicates that little has improved in the past year for those first-time sellers looking to take the second step on the housing ladder, almost two-thirds of second steppers had wanted to move up the ladder in 2012 but were unable to. Raising a deposit has been cited as one of the key challenges. While the property market is likely to continue to be challenging, the fresh support announced [today] will have a real knock on effect across the whole of the housing market and we expect it could help around 50,000 people a year.”

Nick Kennett, Director of Financial Services at Post Office said: “[Today’s] Budget gives potential homebuyers reasons to cheer, whether buying their first home or looking to move. The Chancellor’s ‘Help to Buy’ scheme is just what is needed to get the country moving.”

Source: propertytalk Live!

Big investors to be encouraged into private rental sector

The property industry is calling on the Government to explicitly encourage big investors to back ‘build to rent’ schemes.

The Montague Review, out to consultation, is looking at whether there are barriers preventing institutional investment in the private rented sector, on the basis that more rental accommodation is needed than the existing buy-to-let sector – which is mostly made up of small landlords – could possibly supply.

A response has been submitted jointly by the British Property Federation, Association of Real Estate Funds and the Investment Property Forum.

It says that big investors could be interested in the sector if there were legal S106 agreements in place, ensuring that all units on a development would be rented out for at least ten years and not sold.

The response also calls for this type of housing to be recognised in the National Planning Policy Framework, so that local authorities could meet housing need through ‘build to rent’ schemes.

Andrew Stanford, of the British Property Federation, said: “There is interest among institutional investors to invest in housing, but barriers such as scale and low net income yield remain.

“If we want to attract the sort of sums that will really make a difference to housing supply, then we need some support via the planning system to deliver a different rental product and support the yields that institutions seek.

“This would be a cost-free way for Government to boost housing supply, and would actually be profitable for them if they invested public land.”

John Cartwright, chief executive of the Association of Real Estate Funds, said investment firms could create new “large-scale, residential investment products for the ordinary man or woman on the street, an easier and more diversified option than buy-to-let”.

He added: “We are aware that a number of well-known firms have expressed serious interest in this sector.

“And with younger people being forced to rent while they save for that first deposit, residential funds could give them the opportunity to invest in the housing market and gain potential returns before they are in a position to buy.”

Budget 2012 – Property industry reaction

Chancellor George Osborne has spoken. Here, key members of the British property industry deliver their  verdict on yesterdays Budget…

The British Property Federation said it had enjoyed lobbying successes in areas such as stamp duty land tax, which would not extend to commercial property, a consultation on the simplification of green taxes, and the NPPF, which retained the “presumption in favour of sustainable development” – all policies the BPF had championed ahead of the Budget.

However the BPF said the property industry was left disappointed by “small beer” tax increment financing proposals, the lack of Mortgage REITs to support bank deleveraging, and the Chancellor ignoring calls from his own backbench to provide empty property rate relief.

Liz Peace, chief executive of the British Property Federation, said: “We asked the Chancellor first and foremost to do no serious harm in his Budget to an industry that is still struggling – by and large we’re satisfied this is the case. It certainly could have been a lot worse.”

Adrian Coles, Director General of the Building Societies Association said: “Although we are not surprised, given how well trailed the content of this Budget has been, we are disappointed that there is precious little in it for ordinary savers and aspiring borrowers.

“The Chancellor has failed to take an easy opportunity to help UK savers by allowing them to use their whole ISA allowance in a cash ISA. He hasn’t helped those nearing retirement by permitting transfers of ISA money from stocks and shares to cash either. It is also a shame that the focus on stamp duty has been at the top end of the market, ignoring the cost of this tax for first-time buyers.”

David Salusbury, Chairman, National Landlords Association, said: “Regrettably, there has been no recognition in the Budget statement of the barriers to investment presented by the current system of property taxation.

“While the NLA believes the Government is justified in closing the Stamp Duty loophole to prevent tax avoidance, the Treasury should not ignore the impact these measures will have on legitimate companies which buy property to let as their primary business activity.

“This is likely to adversely influence investment decisions made by landlords who operate as small businesses and provide much needed housing.

“The NLA will seek discussions with the Treasury to see whether it is possible to differentiate genuine property businesses from companies set up purely for tax-avoidance.

“Calls for a comprehensive review of Stamp Duty continue to be unheard. This could have been a good opportunity to stimulate more investment and encourage growth in the residential property market.”

John Whiting, Tax Policy Director at the Chartered Institute of Taxation, said: “Nobody can be surprised at the decision to take action against SDLT avoidance. The targeting of ‘non-natural persons’ for both SDLT and CGT additional charges is an understandable attempt to catch all manner of vehicles but the legislation will need careful drafting to make sure the measures are practical and workable.

“It is also interesting to note the clear warning about retrospective action if people attempt to sidestep these new rules. The Chancellor is building some solid walls around the SDLT system and wants to make sure the foundations are equally watertight.”

Suren Thiru, Lloyds TSB housing economist, said: “The impact of the increase in the stamp duty rate for homes sold for over £2million on the housing market is likely to be very limited. However, strong demand from wealthy cash rich buyers, as well as limited supply of such properties, is likely to continue to boost the level of activity at this end of the housing market.”

Richard Gordon of UKPI said: “Overall this Budget has been well received within the property sector. However, as far as the UK property market is concerned, it is felt more could have been done in certain areas, particularly in the way Stamp Duty Land Tax (SDLT) is applied. The banding of SDLT means those buying or selling a property priced just above a particular threshold are disadvantaged.

“I am also concerned about the effect the 15% SDLT rate will have for Companies whose business is investing in blocks of apartments for buy-to-let. The additional tax could make certain deals financially nonviable. We await further clarification on this point.”