HM Treasury – Budget 2011

 

George Osborne delivered his “Budget for Growth”from “rescue to reform and reform to recovery” on Wednesday.  Despite operating within clear economic constraints following the announcement of a rise in inflation to 4.4% and weaker than expected tax revenues, the Chancellor still managed some giveaways.  In particular, there were headline tax breaks for companies and for the “squeezed” middle and lower income families.
There were several key, headline announcements relating to access to mortgage finance and housing, including:
-        Reform the stamp duty land tax rules applied to bulk purchases for residential properties and make Real Estate Investment Trusts easier to set up and more accessible to investors.  This will reduce a barrier to investment in residential property, promoting private rented housing supply;
-        The Government will provide £250million to support first-time buyers to purchase a new-build property.  The FirstBuy programme will assist over 10,000 households with equity investments jointly funded with house-builders;
-        The Government will help homeowners facing difficulties by extending for a further year temporary changes to the Support for Mortgage Interest (SMI) scheme.  The 13-week waiting period and £200,000 limit on eligible mortgage capital will now remain in force for new working age SMI claimants until January 2013;
The Budget also revealed that the Government will announce the outcome of its review of the stamp duty land tax relief for first-time buyers in autumn 2011.
There are also several announcements relating to planning.  The Government will:
-        Introduce a new presumption in favour of sustainable development, so that the default answer to development is “yes”;
-        Localise choice about the use of previously developed land, removing nationally imposed targets while retaining existing controls on greenbelt land;
-        Pilot a land auction model, starting with public sector land;
-        Introduce a number of measures to streamline the planning applications and related consents regimes removing bureaucracy from the system and speeding it up.  This will include a 12-month guarantee for the processing of all planning applications, including any appeals;
-        Ensure a fast-track planning process for major infrastructure applications through the Major Infrastructure Planning system; and
-        Consult on proposals to make it easier to convert commercial premises to residential.
Budget 2011 – Industry reaction
Wendy Evans-Scott, President Elect of the NAEA said: “The Chancellor’s help for first-time buyers is a good gesture towards re-starting the stalling property market. However, it is nothing more than a gesture – the focus on new build properties, rather than incentivisation across a broader spectrum of property, means there will still be little upward momentum in the market. While the measures aimed at first-time buyers must be welcomed, it is unlikely that they will provide the kick-start that the housing industry badly needs.
“The review of Stamp Duty, for which we have long-campaigned, is a positive step and we believe the Chancellor is right to address planning laws and change of property use. However, without the ability to overcome the substantial capital barriers that are currently restricting property ownership, the market will stagnate in 2011. Such a stagnation has wider implications for the economy as it restricts the flexibility of the workforce and the ability of families to own the homes they need as they grow. Encouraging first-time buyers back to market is an important first step, but it is just that – a first step on a long road to recovery.”
Ian Potter, ARLA Operations Managerresponded as follows: "We have campaigned for a number of years for the Government to reform Stamp Duty, so its inclusion in this year's Budget is a welcome one - particularly for the Private Rented Sector (PRS).
"The PRS plays a vital role in the housing market but is suffering from a lack of institutional investment, which in other countries is flourishing. In the UK there are many barriers to this kind of investment but by reforming Stamp Duty to bulk purchases, it seems the Government might be removing one of them. This, we hope, will help drive institutional investment to the UK PRS, benefiting the housing market has a whole. In addition, and depending on exact details, the proposed changes to REITs could act as a further step towards enabling institutional investment"
The Council of Mortgage Lenders welcomed the modest support measures announced for housing in the Budget, although they are unlikely to create any fundamentally different landscape for homebuyers.

The time extension of the Support for Mortgage Interest scheme and the introduction of the FirstBuy scheme - a shared equity scheme not dissimilar although less generous than the previous HomeBuy Direct scheme - are the most notable measures relevant to the mortgage market.
TheRICS was pleased that the Chancellor has listened to its calls to make changes to stamp duty and Real Estate Investment Trusts (REITs) to support investment in house building.  As an organisation, the RICS has been calling for these changes for several years and have worked closely with the Treasury and other industry bodies to help support this new approach to rented housing.
The Building Societies Association looked forward to the outcomes of the Government’s review of Stamp Duty for first-time buyers in the autumn.  However, the BSA believes the Government should address the overall fundamental flaws of Stamp Duty.  The current “slab” system results in the bunching of transactions at prices just below the thresholds.   It’s time Stamp Duty in its entirety was reformed.
Shelter warned that the Chancellor’s Budget announcements will have little impact on our housing crisis.
The Home Builders Federation said the measures announced in the Budget to support house-building demonstrate that the Government is listening and has recognised the severity of the housing crisis and the vital economic role the house-building industry plays.  The Government must now build on this positive Budget and ensure it puts in place long-term changes to the planning system to avoid falling further into crisis.

NAEA: Chancellor must free up the housing market further

Wendy Evans-Scott, President Elect of the NAEA said: “The Chancellor’s help for first time buyers is a good gesture towards re-starting the stalling property market. However, it is nothing more than a gesture – the focus on new build properties, rather than incentivisation across a broader spectrum of property, means there will still be little upward momentum in the market. While the measures aimed at first time buyers must be welcomed, it is unlikely that they will provide the kick-start that the housing industry badly needs.
The review of Stamp Duty, for which we have long-campaigned, is a positive step and we believe the Chancellor is right to address planning laws and change of property use. However, without the ability to overcome the substantial capital barriers that are currently restricting property ownership, the market will stagnate in 2011. Such a stagnation has wider implications for the economy as it restricts the flexibility of the workforce and the ability of families to own the homes they need as they grow. Encouraging first time buyers back to the market is an important first step, but it is just that – a first step on a long road to recovery.”

Budget 2011 at a glance: George Osborne's key points

 

The key points of Chancellor George Osborne's Budget on 23 March 2011.

FUEL, CIGARETTE AND ALCOHOL DUTIES

Fuel duty to be cut by 1p per litre from 1800 GMT
Planned 4p per litre rise due in April to be delayed to 2012
Annual fuel duty escalator to be scrapped until 2015
VAT on fuel will not be reduced
No additional changes to alcohol duty rates
Tobacco duty rates up by 2% above inflation, duty regime to be reformed

INCOME TAX

No personal tax increases
Personal tax allowance to rise a further £630 to £8,015 in April 2012
Consultation on long-term plan to merge income tax and National Insurance
50% top rate of tax to remain but review of how much it raises

UK ECONOMY

2011 growth forecast downgraded from 2.1% to 1.7%
2012 forecast also down from 2.6% to 2.5%
Inflation set to remain between 4% and 5% in 2011

BORROWING

Forecast borrowing of £146bn this year, £2.5bn lower than anticipated
Borrowing to fall to £122bn next year, dropping to £29bn by 2015-16
National debt forecast to be 60% of national income this year, up to 71% in 2012

OTHER TAXES AND ALLOWANCES

Council tax to be frozen or reduced this year in every English council
10% discount on inheritance tax for people leaving 10% of estate to charity
Rise in air passenger duty to be frozen this year
Private jet users to pay passenger duty for first time
Levy on so-called "non-doms" up to £50,000 for those resident in the UK for 12 years
Tax avoidance clampdown to raise £1bn this year
Support for families in the south-west of England with water bills

HOUSING

Government-backed shared equity scheme to help 10,000 first-time buyers

HELP FOR BUSINESS

Corporation tax to be cut by 2% in April, not 1% as previously planned
Bank levy to be adjusted so banks do not pay less tax as a result
43 tax reliefs to be scrapped as part of simplification of tax code
£350m of business regulation to be scrapped
No new regulation on firms with fewer than 10 staff for three years
Business rate relief holiday for small firms extended for another year
New rules to require planners to prioritise growth and jobs
£100m funding for science facilities
21 "enterprise zones" to be launched, backed by tax incentives

JOBS AND SKILLS

Funding for 12 further university technical colleges
40,000 new apprenticeships for young people out of work
Funding for 100,000 work experience placements

PENSIONS

Accepts Hutton review of reform of public sector pension contributions
Long-term aim for £140 a week flat-rate state pension - not to apply to current pensioners

TRANSPORT

£100m for repairing potholes in England
£200m support for regional railways in England

GREEN MEASURES

£2bn extra funding for Green Investment Bank - to launch in 2012

Homeowners fail to grab opportunity to reduce mortgage

 

A staggering eight out of ten homeowners could be missing out on the opportunity to shave years off their mortgage by overpaying even small amounts, research by Barclays has revealed.
The lender is urging those homeowners who are not overpaying to start if they can afford it, while interest rates are still low.
The study found that only 10% of homeowners said they were currently overpaying on their mortgage, while just a further 6% said they planned to start overpaying this year.
It also revealed 24% said they aimed to pay off their mortgage early, with more than half of these (56%) saying they hoped to cut their mortgage term to 15 years or under.
The "average" overpayment is currently £200.82, which on an average mortgage of £150,000 over 25 years could see the term reduced by seven years and three months.
Even as little as £50 can have a huge impact - an extra £50 per month on the same typical mortgage would reduce the term by two years, four months.
Andy Gray, head of mortgages at Barclays, added: "We've seen just a modest increase in the amount borrowers are overpaying on their mortgage in the first two months of this year compared to the same period last year.
"We are still experiencing low interest rates and mortgage affordability is at its best levels for more than a decade so we would urge borrowers who can afford it, to start overpaying now, as putting an extra £100 to their mortgage each month will pay off their mortgage four years earlier and reduce the amount of interest that is paid.
"Most mortgages allow a generous 10% overpayment per year so rounding your repayments up to a few pounds more a month is a really good habit to get into if you can afford it and will reap its rewards when you are mortgage free years earlier than planned!"

House prices achieve premium in spa towns

 

Property prices in spa towns across England and Wales are on average £38,000 (or 16%) above their county average, according to Lloyds TSB research.
Average house prices in 15 of 18 spa towns surveyed are significantly higher than those in neighbouring towns.
Boston Spa (£153,629, or 98%) and Ilkley (£152,022, or 97%) - both in West Yorkshire - command the highest house price premium to their county average. Only three spa towns have house prices below their county average: Epsom in Surrey (-5%), Llandrindod Wells in Powys (-7%), and Boston in Lincolnshire (-15%).
Some 15 spa towns have seen houses prices at least double in the past decade. The largest increase was in Builth Wells in Powys (153%) followed by Tenbury Wells in Worcestershire (143%), Boston Spa (141%) and Matlock in Derbyshire (140%).
* Epsom is the most expensive spa town in the country with an average house price of £357,837, followed by Tunbridge Wells (£337,144) and Bath (£324,250);
* The least expensive spa towns are Boston in Lincolnshire with an average price of £132,912 and Llandrindod Wells in Wales (£168,428).
Nitesh Patel, Housing Economist at Lloyds TSB, said: "Spa towns tend to have a larger stock of period architecture, such as Georgian or Regency, which are often larger and command higher prices. Spa towns are also often thought of as having a high quality of life, including excellent schools, lower crime rates, and lesser traffic volumes, all of which drive desirability in these areas and ramp up value. It all adds up to a significant success story for the housing market in these areas."
* Homebuyers must part with over £100,000 more to live in one of the spa towns in Yorkshire's "Golden Triangle". House prices in the spa towns of Boston Spa, Ilkley, Harrogate and Knaresborough are, on average, £105,000 (or 59%) higher than their county average;
*  The average age of the housing stock in spa towns is 67 years, which is 13 years older than for the UK (54). Bath and Matlock have the oldest housing stocks with an average property age of 92 years;
* Houses in spa towns also tend to be bigger than in the UK as a whole, with an average of 5.5 habitable rooms compared to the national average of 5.2. The largest houses are in Ilkley and Malvern with an average of 5.8 habitable rooms in both towns.

Cheaper to buy property than to rent

 

It is now cheaper to buy a home than to rent property in most of the UK, research has revealed.

Property website Zoopla.co.uk found that renting costs an average of 10.5% more than paying interest on a mortgage for the same type of property.

Low interest rates and falling house prices mean people are better off buying a two-bedroom flat than renting one in eight out of ten towns and cities in Great Britain.

Rents exceeded the cost of having a mortgage by more than 20% in 14 of the largest towns and cities in Great Britain.

Milton Keynes recorded the biggest difference. There, it costs 42% more to rent a home rather than buy one, with rents on a two-bedroom flat averaging £785 a month, while an interest-only mortgage on a similar property would be £554.

However, mortgage supply issues mean many people simply cannot borrow sufficient money to buy their own home - and this is behind the increased demand for rented accommodation.

LUDLOW LEAPS ONTO LIST OF MOST SOUGHT-AFTER LOCATIONS

A local firm of leading property specialists is backing a national newspaper’s claim that Ludlow is one of the UK’s prime locations for house hunters.

Shropshire-based Nock Deighton, which has an office in the picturesque market town, said it was no surprise to see Ludlow recently named by the Daily Telegraph as one of the country’s 20 ‘Hot Spots for a Happy Retirement’, alongside other notable locations such as Bath, Chichester and the Isle of Skye.

The report highlighted the town’s rich architectural history – Ludlow is home to more than 500 listed buildings, a medieval castle and the largest Parish church in Shropshire, St Laurence Church – and also praised its annual Food and Drink Festival, Britain’s first such event and one that is widely recognised as one of the best in Europe. It also took into account local transport links, the availability of attractive but affordable properties, and whether there was a thriving and active local community.

Michael Evans, Managing Director for Nock Deighton and Manager of their Ludlow office since 1989, commented: “This report will come as no surprise to anyone who has lived in, or ever visited, Ludlow.  As someone who has had strong roots in the town for many years, I know what a welcoming and friendly community it is to live in.

“Many of our buyers are attracted to the town from much further afield than Shropshire, including London and the Home Counties, the West Midlands, and the North West of England, and they are all taken aback by the quality of life and beautiful scenery on offer. It’s no wonder the renowned author John Betjeman was said to have once described Ludlow as ‘the most perfect historic town in England’,” Michael Evans concluded.

Formed in 1831, Nock Deighton is one of the Midlands’ most well-established and respected firms of estate agents, lettings agents, chartered surveyors, block management agents, and auctioneers. The company stands at the forefront of the modern property sector by embracing up-to-the-minute technology and industry best practice, and has a firm focus on achieving the very best results through a full range of specialist property-related services and dedicated staff.

For further information on Nock Deighton’s professional services please visit http://www.nockdeighton.co.uk/ or contact: the Ludlow office on 01584 875555; the Bridgnorth office on 01746 767767; the Ironbridge office on 01952 432533; the Telford office on 01952 292300; or the Shrewsbury office on 01743 241251.

Latest Land Registry figures record marginal rise in house prices

 

House prices rose 0.2% from December to January, according to the latest Index data from Land Registry.
Figures also showed an annual price decrease of 0.9% - which takes the average property value in England and Wales to £163,177.
Two regions in England and Wales experienced increases in their average property values over the last 12 months.
The region with the highest annual price change is London with an increase of 2.4%.
Both London and the South West experienced the greatest monthly rises both with movements of 1.6%.
The region with the greatest annual price fall is Wales with a decrease of -6.1%.
Wales also experienced the most significant monthly price fall with a movement of -4.2%.
The most up-to-date figures available show that during November 2010, the number of completed house sales in England and Wales dropped by 12% to 54,012 from 61,058 in November 2009.
Meanwhile, the number of properties sold in England and Wales for more than £1million decreased by 2% between November 2009 and November 2010, from 532 to 520.

RICS calls on Government to support growth in property and construction

 

RICS Pre-Budget submission to HM Treasury.

Measures to encourage growth in the housing and commercial property sectors should feature in the next UK Budget, according to RICS proposals issued today. 
Property and construction act as significant drivers of growth in the wider economy. Every £1 spent on construction contributes £2.84 to economic activity, and the industry employs around 900,000 people. The value of all property in the UK is over £4,500 billion and the sector employs some 500,000 people. By encouraging activity in these sectors, the Government will be able to promote economic recovery and provide long-term, sustainable growth.
RICS would also like to see a detailed plan for achieving efficiency savings of £5 billion in public sector property costs, and disposals of £20 billion, over the next ten years through long-term strategic planning and retention of the brightest professional talent in the public sector. 
While RICS acknowledges that significant cuts have been needed to reduce the deficit, this Budget provides an opportunity to initiate a sustainable recovery by restarting the massive engine of growth that is the construction and property sector.
RICS proposals include:

• Cutting VAT on refurbishment of homes
• Changes to the tax system to encourage residential property investment
• Reinstating empty commercial property rate relief

This Budget provides the Government with a chance to encourage growth and innovation in construction and property, providing much needed jobs, tackling the housing shortage and ensuring that businesses have a continuing supply of high quality premises. With house-building at a desperately low level, it is essential that the Government takes steps to attract investment into the residential sector.
Mark Goodwin, RICS Director of External Affairs

A recent survey of leading property professionals in the public sector shows that most fear the loss of vital professional talent in the wake of government cutbacks*. 

More strategic and efficient management of public sector property assets has rightly been identified as a golden opportunity for the Government to make savings of around £5 billion over the next ten years and release some £20 billion through disposals.
Lead times in property can be lengthy and short-term cuts can have unintended long-term consequences. The success of the Government’s emerging strategy on public sector property asset management will depend in no small measure on attracting, retaining and developing talented professionals.
Mark Goodwin, RICS Director of External Affairs