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How will the 2016 Budget affect the property market?
George Osborne’s budget has left the future of the property market on shaky ground, with an emphasis on increasing transaction fees – forcing potential homebuyers to pay higher rents and spend longer saving for a deposit, despite the new Lifetime ISA scheme due in 2017.
In his eighth budget since the Conservative party came to power, George Osborne was under pressure to direct more funding into property development, after new research began to reveal the effects of his previous funding cuts. When the Tories came to power, one of their key commitments was to increase housing investments in an effort to keep the property market open to younger and less wealthy prospective UK homeowners.
Unfortunately, as of 2010, levels of home ownership have dropped sharply and Osborne has done little to address the situation. While 300,000 fewer first time buyers are entering the market versus previous years, the UK is also facing the slowest rate of new-build homes in almost a century – and as a result many are finding themselves stuck in the rent cycle. For many within the industry, this year’s budget needed to tackle the lack of investment head-on or risk a further demand on the government for housing benefit as rental prices soar to accommodate the increase in stamp duty proposed for April.
So how did Osborne do? Well, many were hoping that the stamp duty increase would be discarded or at the very least postponed, but unfortunately the tax hike will still go ahead next month – and now also includes large-scale purchases for those buying over 15 properties simultaneously. This is bad news for landlords, with a recent survey showing that many plan to quit the sector, limiting the availability of rentable homes. This may drive up rental costs, which in turn will increase the time that prospective home owners will need to acquire the funds necessary for a deposit.
“This policy is misguided as in an attempt to reduce demand by some buyers,” said Lawrence Hall of Zoopla Property Group.“It ignores the fact that the private rental sector provides an essential service for millions of adults who are happy to rent, especially in their 20s and 30s. By hitting the rental sector with higher taxes and lower reliefs, the chancellor is making renting more expensive and getting on the ladder even harder for Generation Rent.”
Many are also worried about the effect this budget will have on foreign investment within the UK, driving them away to countries where transaction costs are lower – but more importantly, it paints a picture of a future where the number of those capable of buying a home will lessen, heavily impacting private sellers looking for a fast house sale.
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