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.”

Consumers confident in property despite economy

Consumer confidence in the housing market remains remarkably stable – if far from booming – despite the gloomy outlook for the economy.

That is the verdict of the latest quarterly Property Tracker survey from the Building Societies Association. Consumer sentiment is a key indicator of future activity in the property market and provides an early snapshot of potential activity in 2012. A cross-section of 2069 adults across England, Wales and Scotland were asked for their views and intentions about home purchase in early December by YouGov.

Q: Is now the right time to buy a home?
44% felt that now was a good time to buy compared to 25% who did not. This is a slight improvement on March 2011 when 41% were positive about buying in the current market and 29% were negative.  The results showed some interesting age and regional variations reflecting the mood of the country.  The over 55s had the most positive view of the current market with 54% saying that now was a good time to buy.  Conversely the 18-24s were the least sure with 32% agreeing it was a good time to buy. The public in Scotland and the South East and North East regions were the most positive about the market with results above the national total at 49%, 48% and 47% respectively.  Surprisingly consumers in London were among the least positive with just 42% believing that now was a good time to buy.  This may reflect the higher house prices in the capital.

Q: Do you intend to buy a property in 2012?
Overall, 12% of respondents intend to buy next year whereas 63% said that they had no need or desire to move in 2012 and 17% said that they would not be in a position to move. A further 8% were put off moving for some reason such as the outlook for jobs or the size of deposit required. Perversely when compared to views about the market the over 55s have the least intention to buy next year at just 8% with the 24-34s having the highest intention to buy in the next 12 months (21%).  Looking across different regions, Londoners had the greatest intention to buy next year, with 21% saying that they intend to purchase property. The regions where intentions are next highest are the West Midlands (16%), the South East, and Yorkshire and the Humber (both 15%). In contrast, those in Wales (5%), the North East (6%), and the North West (7%) have the least intention to buy in 2012.

Q: What are the barriers to buying a home?
Challenges remain in realising intentions to buy. The most common barriers cited by respondents are: raising the deposit to buy a property (64%), obtaining a large enough mortgage (57%), and unsurprisingly in the current environment, fears over job security (54%).  Far fewer see the potential for future house price falls as a barrier (21%).  There are a number of regional, gender and age differences in consumer views about the barriers to home purchase:

  • More men than women see the potential for falling house prices as a barrier to purchase, 24% compared to 18%
  • The 24-34 age group are the most concerned about their ability to raise a deposit at 70%, 6% above the national total
  • More women see job security as an issue with 57% of female respondents citing it as a barrier compared to 51% of men
  • The over 55s are however the most concerned about job security with 63% seeing it as a barrier compared to the national total of 54%.  The 18-34s seem least concerned about this factor at 46%
  • Of people who currently rent from their council/local authority 53% saw raising a deposit as a barrier, this compares with 68% among those renting from a private landlord and 62% from those renting from a housing association, perhaps reflecting positive views of the Government’s recent change to Right to Buy.

Q: What do you think will happen to house prices in the next year?
Views are mixed with 33% overall expecting prices to rise compared to 28% who believe that they will fall and 20% who see them staying the same. Men are more bullish than women with 35% expecting prices to be higher this time next year. It is telling, however that 36% of young adults (18-24) simply don’t know what to expect. Conversely the 50-54s who have seen house prices rise and fall before are the most positive with 37% expecting prices to rise, though the majority of this group expect it to rise by less than 2%. Regionally, consumers in the West Midlands and Scotland have the highest expectations with 38% and 40% respectively calling it in favour of price rises.  At the other end of the spectrum, only 23% of the respondents in the North East expect prices to rise compared to 31% who expect them to fall.

BSA Head of Mortgage Policy, Paul Broadhead said: “Although there has been a stream of gloomy economic news recently, and the uncertainty about the euro zone has increased dramatically, consumers’ views on the housing market remain remarkably solid. Many people believe that it is currently a good time to buy, and about one in eight (12%) will be looking to enter the market or move in 2012, especially in London where 21% intend to buy.

“Government policy announcements such as the new build indemnity scheme indicate how important the housing market is to the UK economy, so the fact that confidence is not weakening is reassuring. More is in the pipeline to help break down the barriers to home ownership, although this must always be tempered with a responsible approach to lending as home ownership is not always the most appropriate choice for everyone.

“So far this year building societies and other mutual lenders have supported those who have wanted to buy property, with gross lending by mutuals up 15% year on year, while across the rest of the market mortgage lending is slightly down.”

Source: investortoday.co.uk