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For buy to let landlords, Philip Hammond’s autumn budget on the 29th October threatened to administer a nasty bite…but in the end it was little more than a feeble bark.

For now at least the worst fears of buy to let landlords are unfounded.

This blog considers the impact of the budget on BTL landlords, stamp duty, housing and first time buyers. 

1. Buy to let landlords

BTL landlords can breathe easy – at least for now.

The removal of mortgage interest relief for individual BTL landlords was not extended to companies.

There was no further hike in stamp duty which has been instrumental in the big fall in property prices in central London and a clear reduction in the number of buy to let properties countrywide.

However, no BTL landlord should even think about celebrating. 

With the government still committed to cutting borrowing and debt as a percentage of GDP, it is highly likely that they will be looking to raise taxes going forward – and the property sector remains an area where they can tax without upsetting a high percentage of the electorate.

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2. Stamp duty

Chancellor Hammond announced new stamp duty relief for first time buyers of shared ownership property up to £500,000.

That is undoubtedly good news for first time buyers, but the fact that the discount is applied to properties as high as £500,000 shows just how expensive shared ownership property is – and begs the question whether even such property is becoming unaffordable.

3. Housing

Here are the housing headlines as reported by the BBC on budget day:

  • £500m for the Housing Infrastructure Fund, designed to enable a further 650,000 homes to be built
  • Lettings relief limited to properties where the owner is in shared occupancy with the tenant
  • New partnerships with housing associations in England to deliver 13,000 homes
  • Guarantees of up to £1bn for smaller house-builders

The chancellor also announced giving power to 500 neighbourhoods to allocate land for housing to be sold at a discount to local people.

In addition, he mentioned that he would be consulting on making it easier for commercial premises to be converted into new homes – something many developers have been asking for.

He also mentioned providing £675m to create a Future High Streets Fund to save high streets. Part of the money can be used to meet the housing challenge – presumably by encouraging the conversion of upper parts of retail units to residential use.

He also confirmed that the cap on councils, limiting their ability to borrow money to build new council houses, would be scrapped.

The Help to Buy scheme will be further extended, from 2021 to 2023.


4. Focus on housing 

What is clear is that the government is heavily focussed on addressing the shortage of homes. That makes sense as the country needs 3 million new homes over the next decade according to some estimates.

However, annual new house targets are not being met and critics argue that the level of funding and the various initiatives are not enough.

There are a rising number of negative factors affecting the housing sector including:

  • High levels of land banking (in the year 2016-17 councils granted permission for 313,700 new homes but only 183,570 buildings were erected: MCHLG)
  • Number of new homes coming on the market at near record low for September (RICS)
  • Fewer people taking out mortgages (home mortgages fell by 10.1% in September 2018 compared to September 2017: UK Finance)
  • Steep fall in new house starts in London (in the quarter ending September 2018, the number of private house starts in the capital fell by around 50% 3,655 compared to 7,153 in the previous quarter: Molior).

The signs are that property prices are set to fall further in London and the South East. If that happens, it seems likely that the government will be compelled to commit even further funds to housing.

However there is a fundamental contradiction in government housing policy which needs to be addressed. Meeting housing targets won’t be attractive for profit hungry developers if house prices are falling – and that is precisely what is likely to happen to house prices if housing targets are met. No wonder builders are sitting on their large land banks.  If they meet government targets when prices are soft, they are going to lose money.

Basically builders are the turkeys being asked to vote for Christmas and they seem way too smart to do so.

The obvious solution is to scale up public sector housing for rent or buy and downscale help to buy equity loan schemes and other tax-hungry initiatives which boost the private sector, which can only truly thrive where housing is in short supply and super-expensive.

Until that happens, the highly dysfunctional housing market seems set to continue.

The government has taken a big step in the right direction by removing the cap which restricted councils wanting to build council housing.

But does anyone expect councils to jump on innovative methods to build homes fast such as modular building and micro-flats?

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5. First time buyers

The chancellor pointed out that the number of first time buyers is at a 11 year high and 121,500 first time buyers had benefited from the removal of stamp duty on properties up to £300,000.

The new relief for buyers of shared ownership units will no doubt improve these figures further.

By hitting BTL landlords in the pocket and forcing many to sell up, more properties will become available to first time buyers armed with the advantage of not having to pay stamp duty.

Things are getting better for first time buyers – although they are by no means good.

If you are a first time buyer looking to get on the property ladder, now is a great time to do so: interest rates are low, shared ownership is available, the equity loan scheme is on offer and there are generous stamp duty exemptions. 

In the long-term however, the fundamental contradiction of the government’s housing policy will remain.

The government needs to bring down the price of houses but it’s not doing so. Instead it is subsidising the purchase of ever more expensive homes – the Help to Buy scheme was extended by two years in the budget. At some point the subsidies are going to become unaffordable for the country. 

When that happens things could get very messy indeed. 

6. Brexit uncertainty

Something very obvious about the budget was that it reeked of Brexit.

It doesn’t take a genius to realise that Mr Hammond was giving himself room to manoeuvre in case there is a “disorderly Brexit” and the need for government stimulus to the economy.

The chancellor announced that the era of austerity is finally “coming to an end”. That of course is seriously premature with the outcome of Brexit still so uncertain.

Until the outcome of Brexit is clear, nothing is certain about the economy or the policy direction the chancellor will take.

We all need to hold our  breath until Brexit ends on the 29th March 2019 and then check out the lie of the land at that point.   

There could easily be another budget within the next six months. The chancellor has left open the possibility of a full budget instead of the Spring Statement in March 2019 if needed.

The chancellor was fairly nice on taxes on this occasion…in his next budget he may well need to get nasty. 

What are you views on the budget in terms of its impact on BTL landlords, stamp duty, housing and first time buyers? Please leave your comments below.

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Dalton Barrett
Rebel Property Coach

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