Chancellor announces ‘slim pickings’ Budget for property market

Most industry commentators believed Jeremy Hunt’s Spring Budget would be the Government’s final fiscal event before the general election.

Now, they’re not so sure.

Although in part he delivered the tax-cutting statement many back-bench MPs were hoping for, many members of the public were left feeling rather ‘underwhelmed’ once the dust had settled on the detail.

All the pre-Budget hype about 99% mortgages had come to nothing, there was no return of the successful Help To Buy scheme and Stamp Duty Land Tax was left, largely, intact.

The best news for the property market came when Mr Hunt delivered the latest forecasts from the Office of Budget Responsibility on the immediate future of the UK economy.

He told the Commons that the OBR had revised their growth forecast for this year (up to 0.8%) and next (up to 1.9%).

More National Insurance cuts

But the best news was on inflation which he said would fall below the Government’s 2% target ‘in a few months.’

Not only is this good news from a cost-of-living point of view but it should also herald a fall in interest rates which may mean cheaper mortgages before the end of the year.

As for the Chancellor’s own measures, the headline grabber was a further cut in National Insurance. In his Autumn Statement he announced a 2p drop in NI rates from 12p to 10p. He repeated the move in the Budget, trimming further from 10p to 8p. For someone earning £35,000 a year, this will mean a saving of £450 over 12 months.

This will put more money in people’s pockets as will his changes to child benefit thresholds which will be lifted to a maximum earning of £80,000. The Chancellor reckoned this would benefit half a million families to the tune of £1300 per year.

He also announced a further freeze on fuel and alcohol duty – another measure designed to help people hold on to more of their money.

What about the Private Rented Sector?

As far as landlords and tenants were concerned, there was a mixed bag of measures. Obviously, tenants will welcome the NI rate cut and landlords will be relieved that Buy to Let mortgage rates should begin to fall this year.

But Mr Hunt also announced a cut in the rate of Capital Gains tax for second homes from 28% to 24% - saying he believed such a move might free up more properties for sale. But the Private Rented Sector (PRS) already suffers from massive under-supply and any further reduction in the number of rental homes available can only put upward pressure on already rising rents.

The only measure to possibly boost the PRS was the abolition of the Furnished Holiday Lettings Regime. The Chancellor said that this tax benefit disadvantaged local communities looking for long-term housing so he got rid of it in the hope that short-term landlords might switch to longer-term tenants.

And while he was in ‘abolition mode’ he decided to do away with Multiple Homes Relief – a tax mechanism to benefit those purchasing more than one property at the same time. This measure is expected to hit the Build to Rent sector hardest but may also affect some landlords who are looking to expand portfolios.

None of the measures announced by the Chancellor are expected to address the high demand for rental homes or the lack of supply of available properties.

Looking at the property market in general, although there were tax cuts in the Budget, the overall tax burden is forecast to continue to rise but good news on the economy is likely to instil more confidence in potential buyers during the year.

As far as a pre-election ‘giveaway’ budget is concerned, this Budget fell short of the mark so there is now speculation that Mr Hunt may have another fiscal event up his sleeve before we go to the polls.

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