George Osborne’s Budget was announced yesterday. OnTheMarket.com looks at key issues which may affect buying, selling and renting.
The Chancellor has produced some white rabbits for the housing market from his red suitcase on each of the last few budget speeches and yesterday was no exception.
The property sector has got used to watching George Osborne very carefully as on more than one occasion he has used housing to win him votes or pay for other areas of spending.
And while the announcement of the Help to Buy ISA appeals directly to First Time Buyers, it is certainly not the seismic shift of last December’s game-changing Stamp Duty announcement. But some commentators have described it as “a further attempt to keep alive the aspiration of home ownership”.
This new policy will give first time buyers the choice to put their savings into a Help to Buy ISA (a low tax savings vehicle). By doing so, they will receive a government bonus, which will give them a much needed lift on to the first rung of the housing ladder.
The amount of government contribution will be 25 per cent of the total amount saved – so £50 on savings of £200 but up to a maximum of £3,000 on £12,000 of savings.
This policy ties together two key government strategies of promoting saving and also supporting first time buyers as a continuation of its Help to Buy Scheme, which has now assisted a little under 83,000 people buying their first home.The government funded bonus will be paid out when the saver purchases their home. And the value of the homes for which the bonus will be paid out is capped at £450,000 in London and £250,000 in the rest of the country.
And savers will be able to take up the Help to Buy ISA for a period of four years after the plan formally begins later this year. For couples, who are buying their first home together, the total government contribution could be as much as £6,000 to their deposit.
But the fact remains that the level of savings is not going to help a great deal in areas of the country where house prices remain high and the deposits required are a significant barrier to those seeking to buy their first home.
“It is more likely to help get buyers over the deposit hurdle in the lower value, lower growth markets of the Midlands and the north than London and the south east, where significant constraints remain,” explained Lucian Cook of Savills.
So in regards to the market, it does not look like the material numbers affected across the UK as a whole – and particularly in London – are going to be big.
Knight Frank’s Global Head of Research, Liam Bailey, has already worked up the numbers and writes: “The new Help to Buy ISA is likely to be another support for first time buyers. However, we do not expect the impact to lead to a substantial number of new transactions and it is very unlikely to influence pricing in the market.”
The Chancellor also announced 20 new housing zones to encourage development with more details yet to be revealed on this policy.
In addition, the Budget proposes to make it illegal for private sector tenancy agreements to include clauses that prevent the sub-letting of a property.
On page 51 of the Red Book under the title “support for the sharing economy”, the small print says the government will: “make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies.”
Some commentators feel there are many unanswered questions here, such as who will be responsible for the property if the tenant sub-letting leaves the house but the tenant they sub-let to then stays? Watch this space.
So all in all, no seismic shifts but a highly measured political Budget ahead of May’s election.
To read the Budget in full, go here https://www.gov.uk/government/publications/budget-2015-documents.
