Forecast and speculation about how the Chancellor is going to address the housing crisis will no doubt continue. Housing was very much on the agenda this week. Osborne has doubled the housing budget to £2 billion. But he has also targeted buy-to-let.
The Chancellor will introduce a 3% surcharge on stamp duty for buy-to-let properties and second homes starting from April next year. The new levy is expected to raise £625 million next year, a welcome boost to the Chancellor’s pocket. The intention is certainly to give more opportunity to Britain’s ambitious, potential homeowners but also to slow down the booming buy-to-let market. However, commentators are already suggesting that this will hit the entire market. The CML estimates 99% of mortgaged BTL transactions (around 85,000 so far this year) would be caught by the 3% extra stamp duty.
If investors shift their savings away from buy-to-let, the supply of properties for rent will likely shrink and this is not good news for generation rent. PWC’s recent statistics state that the number of 20-39 year olds renting privately is expected to balloon to 59% in the next 10 years; reducing the supply of rented accommodation will only accelerate this issue. Renters may also be at risk of absorbing the overheads and costs of their landlords.
Crisis of home ownership
There is good news for developers. The Chancellor explained that there is a crisis of home ownership amongst young people and has announced that money will be spent to encourage house builders to construct starter homes. These will be offered at a 20% discount on prices up to £450,000 in London and £250,000 elsewhere.
There will also be a London Help to Buy scheme for those within the capital who can save a deposit of 5% of the value of the property they want to buy. They will be able to get an interest-free loan, for up to five years, worth up to 40% of the value.
Business lending
To support small and medium sized enterprises (SMEs) in accessing finance, the government plans to designate Experian, Equifax and CreditSafe under the Small and Medium Sized Business (Credit Information) Regulations 2015. These credit rating agencies (CRAs) will now receive SME credit information from designated banks and provide equal access to this information to all finance providers. The announcement is designed to boost competition in the SME credit market.
In terms of business taxes, 600,000 small businesses are to get business rate relief for another year, but there has been no new information on a business rates review. Osborne has also introduced an apprenticeship levy. Set at 0.5% of employers’ salaries costs, this is expected to raise £2bn a year, but is a somewhat peculiar move if Britain was hoping to keep companies and businesses in Britain.
No jokes
There was some comedy when he pledged the “permanent pothole fund” for roads maintenance. However, overall, George Osborne has not done a bad job of unveiling the first spending review under a pure Conservative government since the 1990s. His finances seem on track to reach a budget surplus by 2019-20 and he also retreated from a series of politically sensitive proposals. The small print from the Autumn Statement will need further scrutiny to find any devil in the details.