Chancellor of the Exchequer, Rachel Reeves, put up taxes by a whopping £40 billion in her Autumn Budget last week but will the property market feel the benefit?
It’s hard to say, which is kind of strange considering the fledgling Labour government puts so much energy into emphasising the relationship between housing and growth.
The NHS and schools were the biggest beneficiaries in their first Budget since 2010.
And it’s true that the Chancellor promised £3bn of additional support for SMEs and the BTR sector in the form of housing guarantee schemes, a £500m top-up for the Affordable Homes Programme and a £1bn investment in social housing remediation.
FUTURES DABBLING
But all of that is a bit like dabbling in the futures market. What about the present?
Don’t get me wrong, I fully applaud the ambition to get Britain building but there’s a housing crisis right here, right now and even though the market is showing positive signs of recovery after a year of steadfast resilience, affordability is still an issue for many thousands of would-be homeowners.
Something similar to the post-Covid Help to Buy Scheme would have injected enormous energy into the market – especially in combination with the prospect of further falls in interest rates and low inflation.
SAVE SUFFICIENT FUNDS
The omission is disappointing but it’s not disastrous. I still think the economic conditions are such that confidence will continue to grow – it might just take a little bit longer without government support.
“It’s a move that will likely reduce the size of the private rented sector yet further.”
The government might argue, of course, that Reeves’ increase in CGT for second homes favours first-time buyers in that it disadvantages landlords. The purchase of homes other than as a primary residence became subject to increased stamp duty from this week – up from 3% to 5%.
The problem here is that it’s a move that will likely reduce the size of the private rented sector yet further.
Anything to further discourage investment in the PRS will lead to fewer homes being available for rent. The more supply is restricted, the higher rents will rise and the higher the rents, the harder it is for tenants to save sufficient funds to amass a deposit.
ACTION REACTION
All of that said, I have faith in the property market to sort itself out in the long term. If employment levels remain high and wages continue to increase while interest rates go on falling, affordability will begin to become attainable for more people eager to get on the property ladder.
Inflation is the key here – it mustn’t be allowed to get out of control again or interest rates will start to drift in the wrong direction and we’ll back to square one.
Which brings me full circle to Reeves’ Budget speech.
Her first words were: “This government was given a mandate to restore stability to our economy and begin a decade of national renewal, to fix the foundations and deliver change.”
Let’s hope she practices what she preaches.
Craig Vile is director of The ValPal Network
