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Budget Reaction - What's in it for us Darling?

publication date: May 6, 2009
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‘Fool’s gold!’
says Nicholas Leeming,

“The housing market stimulus package is fools gold, looking attractive at first glance but lacking in true value. With the Government’s spending deficit looming ever larger there is no pot of gold to be had for the housing market. Extending the Stamp Duty holiday, help for those struggling with mortgage payments and the £500m to kick-start building on housing projects is welcome but will only go a small way towards aiding recovery.
Far better would be to concentrate further on making mortgage lending attractive again for the banks and building societies; this could be fully achieved through the Government using the nation’s balance sheet to indemnify lenders against agreed levels of loss on any new loans if there is a further downturn in values. Confidence in the housing market is turning and the only thing holding it back is a lack of mortgage finance, which must now be the priority.”

‘Unlikely to make
an impact’
says Michael Coogan of The Council of Mortgage Lenders.

“The most important element of this Budget for the mortgage market over the long term may prove to be the new asset backed securities guarantee scheme. This potentially offers an opportunity to restart the capital market funding for mortgages that will be a crucial factor in delivering an adequate supply of mortgage credit. Although today’s Budget measures will have little short-term impact on the housing and mortgage markets, they do at least remove some of the uncertainties associated with the potential impact of withdrawing Stamp Duty and ISMI concessions too early, and provide some relief to the new-build housing market.”

‘Ministers have missed a golden opportunity’
says Paul Smith, Chief Executive of Spicerhaart.

“The Government’s proposed investment of £50bn to rescue the UK property market is no piecemeal gesture, but ministers have missed a golden opportunity to create real change when it is needed most. The continued suspension of Stamp Duty on properties worth up to £175,000 will certainly benefit many house buyers, but we are calling for the Government to increase this to £200,000 to widen the properties within their reach and to help more first time buyers in the South and London areas.
Much of the new funding is set to be invested in social housing with £100m going to local authorities to build new environmentally friendly homes, but the Government could use its influence to set the market on the road to recovery by focusing on first-time buyers. The average first-time buyer needs a 15 per cent deposit before they can purchase their property, which is still unaffordable for most. The Government should either help decrease the amount of deposit required or assist first-time buyers with finding funding through the Government owned lending institutions. It should invest heavily as they are the lifeblood of the industry and the wider economy. Put simply, this budget has missed the target by a long shot.”

‘They have simply not been bold enough’
says Doug Sleaper, Group Sales Director for Badger Holdings.

“We would have liked to have seen the Stamp Duty threshold increased to £250,000, especially in the South East where an average property price is considerably higher than £175,000. This has been a missed opportunity and they have simply not been bold enough.”

‘The good news is all for Switzerland!’
says David Adams, Head of Residential, Chesterton Humberts.

“Useful opportunities to boost the
property market, a key engine for economic growth, have been missed today. Extending the paltry reduction of Stamp Duty for another three months is a slap in the face for those who continue to suffer from the effects of an up to 30 per cent decline in the property market. In a further blow to the London market, anyone earning over £100,000 will be hit with higher taxes, a move which will speed the exodus of financial professionals to Geneva and Zurich which have laid out the welcome mat and are being touted as low tax world financial centres. The good news is all for Switzerland, where the French speaking cantons have seen a huge number of British buyers and is one of the few places in Europe where house prices have held as a result of demand. These will now become property hotspots.
“The low volume of transactions in the British property market is having a negative follow-on effect for retail outlets and the service sector. There are only two ways to effectively boost transaction numbers:
 • Reduce government-imposed barriers to moving
 • Increase lending
Neither of these drivers has been fully addressed by this budget. The Chancellor pledged once again to ease the flow of mortgage finance, but measures previously announced have benefited no-one. Mortgage approvals are still far below normal levels. Mortgage approvals for house purchase in February 2009 were 44 per cent lower than in February 2008, itself a lower figure than normal.”

‘Little to dispel institutional nerves’
says Andrew Pratt, MD,
Residential at Grainger plc.

“This Budget offered the Government a rare opportunity to shape a new approach to the residential property market in the UK, but they have not been bold enough in their approach. Today’s announcement merely echoes the pre-Budget housing package, which has done little to stimulate the housing market so far. However, the Government has indicated in the Budget report that they will be looking to open up dialogue with the industry to construct the best regulatory and policy framework to ensure a more robust residential property sector in the future. As we have long argued, the build-to-rent model presents a workable, viable solution to Government’s housing targets. However, he has done little to calm institutional nerves or encourage large scale investment.
“A reduction in the rate of VAT on property management expenses, perhaps in return for landlord accreditation, and the same treatment of capital allowances for residential investors as commercial property investors would provide a real boost to the development of the sector.”

‘Stamp Duty benefits’ is a false headline grabber’
says Richard Ignatowicz of Mortgage Savers.

“The Chancellor has announced an extension of the £175,000 Stamp Duty threshold to the end of the year but what good is that if first time buyers are typically required to provide 25 per cent deposits to obtain a mortgage?
“‘Stamp Duty benefits’ is a false headline-grabbing statement as very few people can take advantage of it. It will not have any impact on improving the flat housing market. The recent improvements in house purchase figures are also ‘false’ because much is down to cash-rich investors who are sensing that the bottom of the market is nearing and are buying up distressed stock that goes into the ever increasing rental pool. With first time buyers priced out of the market, we are moving towards becoming a nation of renters like most of the continent.”

‘Confidence is already returning’
says Phil Tennant, Regional
Director, Hamptons

“Confidence is already returning to the housing market, especially in London. Any sign that the Government is supporting the housing market can only help further. Today’s Budget took account of the fact the housing market could do with a boost and attempted to tackle the root cause of the problem, which is lack of sensible mortgage financing. It was the withdrawal of mass-market mortgages which stopped the market so dramatically at the end of 2007. Whilst mortgage lenders’ requirements seem to be easing slightly of late, mortgages are still hard to come by. Currently, an Arrangement in Principle with a lender seems to mean little, as many lenders create new requirements as they go along. Any scheme to help return the mortgage market to a sensible state must be welcomed.”

‘They could have
gone further’
says Richard Sexton, Director, Business Development, e.surv Chartered Surveyors.

“We welcome a number of the initiatives in today’s Budget, but at the same time perhaps the Government could have gone further in respect of helping a housing market recovery. The six-month extension of the Mortgage Interest Scheme, which covers mortgage interest payments for people who have lost their jobs, will help limit the number of repossessions. Sales of repossessed properties are acknowledged to have a depressive effect on surrounding property – this should have an indirect and perhaps unquantifiable contribution to a return to house price growth.
“The Stamp Duty holiday on properties under £175,000 will encourage sales; we estimate that circa 55 per cent of property will be exempt from the tax. Increasing mortgage lending by £20bn is confirmation of a trend e.surv has already seen develop in 2009; lenders with Government participation either already increasing volumes or indicating that they have
plans to do so. If these lenders introduce real competitive products at higher LTVs this would encourage wider lending
across the board.
“We welcome the extended holiday that the Government has chosen to grant on the payment of Stamp Duty on properties purchased for £175,000 or less, but in reality, it’s more of a long weekend. Stamp Duty is an obstacle for many buyers, particularly struggling first timers who find getting a foot on the property ladder in London more difficult than most. However, it is important to remember that, even in a struggling economy, there are very few properties available within London under the £175,000 threshold, so first time buyers in the capital won’t really benefit. Less than five per cent of the properties that we are currently selling would benefit from the Stamp Duty break.”

is just a drop in the ocean’
says Stacy Eden,
Head of Property for Mazars.

“The doubling of capital allowances rates to 40 per cent for capital expenditure from 1 April 2009 to 31 March 2010 is good news and could help to bring forward capital investments into this financial year, but only if businesses have taxable profits against which to set the tax relief. When carrying out structural refurbishments, there may be some doubt as to what qualifies for the new 40 per cent rate. Althought the £600m funding to build more homes through unlocking dormant sites is welcome, it is really just a drop in the ocean. The more fundamental issue still remains as to whether the mortgages will be available to house buyers”.

‘We need to see
state aid approval’
says Miles Shipside, Rightmove.

“Nurturing the early signs of housing market recovery relies on two things: a significant improvement in the availability of mortgage finance, especially to first-time buyers. The mortgage guarantee scheme will help, although we need to see state aid approval quickly so the scheme can be introduced as soon as possible. The Government and lenders need to work together to ensure that the scheme and other measures deliver the major increase in lending if the market is to enter a genuine recovery. Second: repossession levels. High numbers of repossessions drive prices down. The extension of support to those having trouble with mortgage repayments, with repossession as a last resort will prevent the wider housing market from spiralling downwards.”

‘Stamp Duty is stopping people moving’
says Michael O’Flynn, Content Editor for

“The Stamp Duty reduction extension is welcome, but the measure doesn’t go far enough and fails to address the fact that buyers have to find significantly larger deposits. Ideally, we should have seen Stamp Duty suspended until the market recovers. £500m for building is good news for the building sector and should help protect jobs and meet housing targets. It should also help increase the number of affordable homes. And a cut in VAT to five per cent for domestic refurbishment and renovation.”

‘More is needed’ says Scott Brown, Estate Agency Partner at Warners.
“This is a welcome step, but more is still needed to reinvigorate the property market. A longer extension to the Stamp Duty ‘holiday’ on properties worth up to £175,000 would have been a better decision and a freeze on all properties up to £250,000 with a sliding scale introduced on homes higher than this value. At the moment, this policy provides a welcome boost to first-time buyers but little for those looking to make their next move up.”

The Chancellor has preferred cars to homes’
says Alan Ward, Residential Landlords Association.

“This Budget is a lost opportunity to help the building industry and the private rented sector. The Chancellor has preferred cars to homes by offering an allowance for scrapping old cars when he could have made a real impact by stimulating property renovation through a reduction in VAT to five per cent, bringing the UK into line with the EU. He has ignored the recommendations of the Government-commissioned Rugg Report. He has ignored our calls for change in taxation to treat landlords as businesses. There is no change either in Capital Gains Tax – to enable landlords to claim rollover relief when buying and selling property – which is something the Residential Landlords Association has been campaigning for to help further stimulate the market. While we welcome the carbon reduction target of 34 per cent by 2020, we await the details.”

‘They are still
working at the wrong percentages.'
Andy Cuthbert, Dot Financial Services.

“The introduction of the scheme to guarantee mortgage-backed securities can not be seen as a positive as this has been spoken about before.
“We need lenders to be working together, as currently they don’t want to lend as it’s too risky. The banks and the building societies are still working at the wrong percentages; the only thing that is going to help the market is getting back to 90 per cent loan to value.”