Impact of Budget on Housing market

The Impact of the 2018 Budget on the UK Housing Market

The housing market in the UK has been eagerly anticipating the direction the economy will take, and this has been recognised by Chancellor Philip Hammond, who hoped to inject some much-needed stability in the recent budget.

There has been a small slowdown in housing activity, which has not been helped by some commentators predicting a slight reversal of house values in the case of a no-deal exit from the European Union. The potential threat of negative equity is sufficient to scare the market into inactivity and the Chancellor sought to give enough confidence to get it moving again. That meant a budget that was aimed at giving buyers sufficient assurance in the market and get it going again. And with recent signs that the UK and EU are getting closer to an exit deal, the signs are looking positive.

To begin with, the Chancellor abolished stamp Duty for all first-time buyers of shared ownership homes with a market value of up to £500,000, and those who bought a shared ownership property within the past year will also benefit, as this policy is being applied retrospective from last year’s Budget. Since first-time buyers do not have to pay stamp duty on properties worth up to £300,000, the extra relief would be on anything above this figure.

The thinking behind this move is to encourage a greater proportion of shared ownership amongst first-time buyers, which should help stabilise prices amongst medium-priced housing.

Another major boost for the market came with the news that the Help to Buy (HtB) scheme has been extended until March 2023.  The highly successful scheme had already been extended until mid-2021, but the Chancellor confirmed that it would be extended for a further two years for first time-buyers only, in an attempt to entice more of them into the market. In addition, regional price caps on eligible properties are to be introduced, making sure that the scheme can only be used on a certain level of property. The price level is set at 1.5X the average first-time buyer price in a particular area, thereby making sense of national variations. This means that in the Capital the maximum price of a Help to Buy house will be £600,000, in the South East it will be £437,600, but in the North East it will be around £186,100. The idea being that first-time buyers in all areas will have a good chance of getting on the property ladder.

There have been some restrictions on home building for several years now, but these were lifted at the 2018 Conservative Party Conference, and the decision to scrap the cap on council borrowing to build new housing has gone ahead. Following this decision, sixty local authorities have pledged an immediate policy to build thousands of homes under the new rules. While the scheme will cost the central Government money in added borrowing, this will be offset by rental returns on the social housing that will be created under the investment.

Philip Hammond also pledged measures to encourage house building, including £653 million for partnerships with nine housing associations; extra money for neighbourhoods to allocate land for housing which can then be sold to local people at a discount; and £1 billion guarantees for smaller housebuilders from the British Business Bank. The budget also added half a billion pounds to the Housing Infrastructure Fund, which local councils can apply to for money to help with building.

If you are looking for a mortgage, Grange Mortgages have consultants who can discuss and recommend the right structure for your needs. Our consultants are available seven days a week and a core part of our service offering is a free, no obligation initial consultation so that we can help you move on and up the property ladder. Call us on 01604 877999.

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