The week that was, the Autumn Budget. Philip Hammond has outlined his £44 billion package of investment, loans and guarantees to increase the annual amount of homes built. But, the question is, does building more homes automatically equal a more fruitful and sustainable housing market for the UK?
In the lead up to the budget there was much speculation regarding the Chancellor’s decision on housing policy. Many expected there to be some sort of reform which would be attractive to first time buyers and there was. The Chancellor announced that stamp duty would be completely abolished for first time buyers on properties worth up to £300,000 and what’s more is that properties worth £500,000 or less will maintain a 0% tax on the first £300,000. However, the Office of Budget Responsibility has said that the policy was likely to push property prices up and not tackle affordability, which is at the heart of the issue. The fiscal watchdog also predicted that the UK’s economy would only grow sustainably at a rate of 1.5%, which is 40% lower than estimated only as recently as 2 years ago. Not only would growth stagnate this year but would also continue to fall to 1.4% in 2018.
The dismal outlook of the future of the economy places worry on the shoulders of many homeowners and first time buyers looking to purchase within the next few years. Households are facing 17 years of stagnation in pay levels but the Conservatives remain hopeful that despite tough times, the housing situation can be improved. It is clear that Mr Hammond is attempting to tackle the housing problem head on. It should be noted that previously Prime Minister, Theresa May, had clashed with the Chancellor on housing policy, saying that more needed to be spent but there was said to be an approval from the Prime Minister on the recent plans laid out by Mr Hammond.
As well as cutting stamp duty tax, the Chancellor promoted the building of new homes. He is quoted to have said, “Experts generally agree that to start to make inroads on the affordability programme we’ve got to be sustainably delivering around 300,000 homes a year.” The figure of 300,000 comes from a recommendation made by a House of Lords economic affairs committee report last year. Whilst there is a demand for more housing, there is some scepticism with how achievable this annual figure is and how it will affect affordability. Between the Autumn of 2015 and the end of March 2017, 287,600 homes were built. The 300,000 annual number is a considerable increase, can that many homes be built?
While the two major changes to housing policy relate to stamp duty tax and the increase in house building, there are also other positives that came from the budget. Other measures that the Chancellor mentioned were new powers that local authorities had been given; they are now allowed to increase council tax on empty homes and some local authorities will have their borrowing caps lifted. With greater freedom in borrowing, some councils will be able to invest in more homes.
Ultimately, the housing problem does seem to have been addressed in the Autumn Budget but the issue remains that any seemingly positive reform will simply be dwarfed by the gloomy economic prospects of the UK.
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