News In Focus
23 April 2009
Property sector lukewarm over Budget
Property industry commentators have given only a modest welcome to Chancellor Alistair Darling's Budget unveiled yesterday.
The Chancellor's package includes an extension until the end of the year for the stamp duty "holiday" for property sales between £125,000 and £175,000, a guarantee scheme for mortgage-backed securities to help free up the wholesale money market, and an extra £500 million to stimulate housing projects in England & Wales stalled due to the recession.
George Clark of Morton Fraser solicitors pointed out that the stamp duty concession was of limited scope, "but it is the entire market which is affected by the current economic situation and, in particular, the continuing reluctance of banks, some now effectively state-owned, to move back into the mainstream residential mortgage market". He added that as the average house price in the Edinburgh area was around the £200,000 mark, it would have been "much more beneficial" had the Chancellor extended the exemption to at least £250,000.
Key differential
Mr Clark observed that with prices having fallen across the board, what mattered for people, whether moving up or downsizing, was the differential between sale and purchase price. "This is where the banks must be forced to act, in order to restore confidence, stimulate market activity and to allow people to move home as their needs change – in other words, to let people get on with their lives”, he said.
Scott Brown of property solicitors Warners also argued that the stamp duty measures were too limited, calling for the tax to be "frozen on all properties up to £250,000, and a sliding scale introduced on homes higher than this value".
He added: “At the moment, this policy provides a welcome boost to first time buyers but little for people in larger homes looking to make their next move along the property ladder.
“Given that people often plan a house move four or five months in advance, the Chancellor is going to have to make a further announcement or decision on stamp duty as early as August this year. If, as it stands, the base level for paying stamp duty returns to £125,000 in January 2010, that will only serve to hamper a property market which is trying to recover.”
Construction woes
In relation to the construction sector, Jacqui Watt, chief executive of the Scottish Federation of Housing Associations expressed disappointment that the package to boost housing did not include any significant money targeted at new-build affordable housing. "This is a huge missed opportunity to create thousands of jobs and homes in communities that desperately need them." And housebuilders called on the Scottish Government to "match or better" for Scotland the additional support announced for England & Wales.
Liz Peace of the British Property Federation was also critical of the overall package: “We suggested a number of ways of temporarily modifying the REITs [real estate investment trusts] regime which would have had virtually no cost for the Exchequer and these have been ignored. We had also pressed for one very simple change that would have encouraged institutional levels of investment in an alternative stream of housing provision through renting, namely the disaggregation of stamp duty on bulk purchases, but this has also been ignored."
She attacked the failure to reverse the ending of empty property rates relief in England & Wales, "despite the traumatic decline of the high street", which she claimed undermined the viabilty of new development and investment.
There was a stronger welcome for the support for the mortgage market, for which the Council of Mortgage Lenders said it had been calling since last year.