The Chancellor delivered his Autumn 2017 Budget against a backdrop of no overall Government majority, party disunity and a recent marked slowdown in economic growth. So not much room for drama!
Most commentators seem to think it was a cautious Budget. Below, we summarise the key highlights from a property perspective;
With immediate effect, stamp duty on all homes under £300,000 for first-time buyers will be abolished. First-time buyers of homes worth between £300,000 and £500,000 will not pay stamp duty on the first £300,000. They will pay the normal rates of stamp duty on the price above that.
If a first time buyer buys a property worth more than £500,000 there will be no relief.
This will save £1,660 on the average first-time buyer property and 80% of people buying their first home will pay no stamp duty at all under the change.
The definition of a first time buyer has been tightened up to ensure only what it regards as ‘genuine’ FTBs can take advantage of the new initiative. “In order to count as a first time buyer, a purchaser must not – either alone or with others – have previously acquired a major interest in a dwelling or an equivalent interest in land situated anywhere else in the world. This includes previous acquisitions by inheritance or gift or by a financial institution on behalf of a person under an alternative finance scheme.” There are various other stipulations to ensure only genuine FTBs receive the relief.
Another issue that once again seems to have been re-created is the “cliff edge”. Although not many first time buyers will be buying at over £500,000, the stamp duty for any first time purchase at £500,001 will now be £5,000 more than for a purchase price of £500,000.
An indirect and welcome consequence is that the marketing tactics used by many house builders will have to change. Previously they used to incentivise buyers by saying that stamp duty would be paid by them. This of course is really a thinly disguised price reduction but developers will now have to think of a different gimmick!
The Chancellor announced £15.3 billion in new financial support for house building over the next five years; this takes the total amount being invested to at least £44 billion.
All with the intent to increase the number of new houses being built.
The Government will give local authorities the ability to crack down on empty properties by charging a 100% council tax premium
Buy to Let:
The Chancellor also announced a consultation on longer term tenancies. This is welcome, although not really a budget issue. Some large scale landlords have offered their tenants longer term tenancies but the take up has been relatively low, suggesting that the majority of tenants value flexibility to move over the security of tenure. It does need to be recognised that a longer term tenancy imposes additional obligations on both landlord and tenant and one consideration is what happens if the tenant wants (or needs) to break the tenancy early. Also, there are restrictions on buy to let mortgages, where most lenders still restrict the length of an assured shorthold tenancy to 12 months and so they will also need amend their criteria.
So in conclusion, the headline grabber was obviously the Stamp Duty Land Tax (SDLT) exemption for first time buyers.
However, will this really benefit first time buyers? The probability is that it will drive up demand and thus house prices and the winners will be those who sell their houses, not the first time buyers, who may pay more for their house because of the upward market pressure on prices. Nonetheless, it is a sensible ammendment to have made and makes it more appealing and easier for first time buyers to afford property.
Otherwise plain sailing for another year, and should you need any advise or help with buying, selling, renting or refurbishing residential property then do let us know.