Industry responds to spring budget

 

Gordon Brown’s tenth – and, some predict, last – budget as Chancellor touched on the problems in the housing sector, but did so gingerly. Michael White of The Guardian called it ‘worthy but dull’, asking, ‘Where’s the headline?’

 

The specifics of the budget included plans for 100,000 new homes. Other budget highlights for the housing sector include £970 million towards shared equity, helping 35,000 Britons become home owners.

 

The introduction of real estate investment trusts (REIT) supersedes the policy of allowing property purchase via a pension plan, which was much ballyhooed but abruptly shelved in December.

 

And of course, the aspects that create the most buzz, both during and between budget announcements are the tax thresholds. The much-criticised stamp duty threshold is raised, but not by an amount that is likely to thrill estate agents or first-time buyers: the current figure of £120,000 goes up by only £5,000. Meanwhile, the inheritance tax exemption threshold will see a phased-in rise, from £275,000 to £325,000 over the next four years.

 

The response from industry professionals has been tepid at best, with many accusing Brown of being too timid in helping both would-be and experienced home buyers. We sample some comments from the housing and financial industries.

 

‘Alliance & Leicester has campaigned for more help for first-time buyers as our research revealed that the majority of them (61 per cent) look for homes over the previous £120,000 stamp duty threshold. This is the second increase in the nil rate threshold for stamp duty in as many years. Whilst this is a step in the right direction and recognises the plight of first-time buyers who are the life blood of the housing market, it represents only a four percent increase.

‘This is not enough. A stamp duty threshold of £125,000 is still nine per cent below the average house price for the first-time buyer which stands at £135,742 today (Source: ODPM).

 

Furthermore, it is likely that many first-time buyers – especially in London and the south-east regions where the average first-time buyer house price is £215,689 and £165,912 respectively (Source: ODPM) – will continue to face the additional financial strain of stamp duty.

‘Therefore, Alliance & Leicester will continue to press for first-time buyers to be made exempt from paying stamp duty.’

 

‘The budget announcement by the chancellor about increasing investment in shared ownership looks interesting and we hope this will benefit a significant number of aspiring first-time buyers. We look forward to hearing more about the details of these schemes. Shared ownership allows first-time buyers to take that first step without having to afford the whole amount of the property, thereby making it affordable and allowing the new home owner to start investing in his or her own mortgage.

 

We see the raising of the threshold for stamp duty to £125,000 as something that will probably lead to increased costs with very little genuine benefit to first-time buyers. It should be increased to £150,000 as soon as possible, or ideally abolished altogether for first-time buyers.’

 

‘The £5,000 raise in the minimum stamp duty threshold is pitiful. The Government argues this exempts an additional 40,000 home buyers each year. However, the focus should be on helping first-time buyers rather than buyers in general. Stamp duty presents the one of the largest barriers to first-time buyers wanting to purchase property. Yet again the Chancellor has let this important group down.

 

‘As first-time buyers often compete with buy-to-let landlords, there is an argument that says the Chancellor is simply creating greater competition for this type of property, making it even harder for first-time buyers to purchase a home of their own. Needless to say we were greatly disappointed that the chancellor failed to heed our calls for a revision of all stamp duty thresholds.’

 

As for inheritance tax, the NAEA commented: ‘We are pleased the Government has agreed to increase the levels at which those inheriting property are subject to inheritance tax. However the Government has failed to note the NAEA’s request to keep inheritance tax inline with house price inflation. With this in mind, inheritance tax remains an unfair levy on the vast majority.’

 

‘Brown has not gone far enough. The Chancellor has paid lip service to helping people find affordable homes in a housing market that is rising at over five per cent year on year. He could easily have exempted first-time buyers from stamp duty altogether, something that has been introduced very successfully in Ireland.

 

‘What is actually needed is revision of our planning process to ensure that more land is released for new housing schemes – especially those with affordable living opportunities and for the social rented sector.’

 

‘Although the [stamp duty] threshold has been raised from £120,000 to £125,000, this should have been higher to really assist Kent’s first-time buyers ... The average home still attracts stamp duty.

 

‘At the moment, the average Kent house price is £207,462 and the average price of a flat is £139,059. To be of real benefit, the Chancellor should have set a threshold of at least £150,000. For many, stamp duty is the largest item of expenditure when buying a home or investment property.

 

‘That said, it was announced that the Deputy Prime Minister John Prescott would give details of plans for £970 million for shared equity schemes to help 35,000 people buy their first homes. This would help to stimulate the county’s housing market, enabling new buyers to get on the first rung of the property ladder.

 

‘In general, Kent house prices are still experiencing growth and an increase of first-time buyers, which is the Government’s aspiration, will stimulate the county’s property market.’

 

‘First-time buyers are the life blood of the housing market and any initiatives from the Government to give them a leg up onto the housing ladder will be beneficial to the wider market. With existing land restrictions resulting in an increased number of apartments being built, an ideal marketplace is already being created for a new generation of property owners. Consequently first-time buyers will be able to benefit from buying new homes, rather than the traditional lower quality secondhand homes that often require high repair and running costs.’

 

‘The rise in the stamp duty threshold is

disappointing; a £5,000 rise is no