CBRE’s Jennet Siebrits makes some early calls on what Phillip Hammond’s debut Autumn Statement could hold for the UK property sector…
Phillip Hammond has already admitted that there is a housing crisis and it needs tackling, saying that the Government will use “all the tools at its disposal” to increase the country’s housing stock. Furthermore, Hammond has outlined his desire for infrastructure projects which could be started quickly and that he is on the lookout for “shovel ready” projects to boost the British economy. Since the construction of every new build home creates four new jobs, housing is one of the most “shovel ready” projects available. And what better way to boost housebuilding then to tie it in with road and rail projects, delivering well-rounded projects and neighbourhoods?
However, while the conversations are happening, we remain unconvinced on whether the Autumn Statement will provide the tools needed to boost the housebuilding sector.
This is partly because Hammond has already pre announced two funds totaling £5bn (the ‘Accelerated Construction’ scheme and a new Home Building Fund). This will probably help build around 40,000 additional homes per year, which is a good start, but well below the additional homes we need. It seems is unlikely that the government will devote any further funding to housebuilding.
Although we disagree with the recent Redfern Review’s conclusion that the lack of supply has not been a significant driver of house price growth, we do agree with Redfern’s proposal that an independent Housing Commission should be set up – the country needs a very long-term strategy on house building (over several decades) and to do this there has to be an independent body able to resist short-term political currents.
The SDLT debate also continues. The Government should seriously consider reviewing the additional 3% stamp duty levy for second homes. While the populist view is this is only relevant for investors, the unintended consequences are clear: Land Registry data shows that house transactions have fallen by a third since its introduction.
Buy-to-let borrowers account for a large share of new-build sales (often up to 60%), but as these buyers disappear, so will the level of housebuilding, which reduces much needed supply. And the reduction in second home buyers has been coupled with fewer transactions in the £1m plus market, as buyers are deterred by the 2014 SDLT increase.
Together this means an already dysfunctional market has become even less liquid. If Mr. Hammond removed the additional stamp duty levy the market would likely see a pick-up in transactions and renewed movement in the market. This is certainly an attractive scenario from a financial perspective, given that the stamp duty changes to date have resulted in around half the expected tax receipts.
Let’s see what transpires…
Jennet Siebrits is Head of Residential Research at CBRE UK
Views of Contributors are not necessarily those of PrimeResi or its Publishers