What does the Budget mean for you?
Wednesday, 12 March 2008 12:00 AM
Today chancellor Alistair Darling outlined the government's fiscal plans for the coming year - but what impact will it have on the UK's homeowners?
The short answer is: not a great deal.
Most importantly, the chancellor ignored virtually universal calls from the housing industry for a reorganisation in how stamp duty is collected.
This tax on property sales has grown increasingly controversial in recent years, as property prices have risen - forcing first-time buyers and other vulnerable groups to shoulder a growing burden when making a property purchase.
Research from the National Association of Estate Agents (NAEA) shows the average stamp duty bill for first-time buyers has almost doubled over the last five years.
And total stamp duty revenue from residential property sales in the UK collected by the government rose by 40 per cent in 2006/07 alone - up to a record £6.4bn.
While the lowest stamp duty threshold was increased by £5,000 in 2006, to £125,000, this has done little to alleviate concerns.
As a result the chancellor came under pressure today to make a change - perhaps introducing a more progressive system, mirroring income tax.
However, the fiscal realities informing the Budget made this unlikely. The chancellor needed to account for each penny spent, and a cut in this lucrative income was seen as inappropriate.
Some concessions were offered in the form of an extension to shared ownership and equity schemes - for key workers as well as first-time buyers - but this will only reach so many.
Frst-time buyers will continue to face mounting difficulty securing a foot on the property ladder - a trend the chancellor appears unable or unwilling to tackle.
Furthermore, following the credit crunch and the American subprime mortgage fiasco, securing finance for property purchases has also been difficult.
Lenders have been tightening borrowing criteria - removing 100 per cent loan-to-value (LTV) mortgages, and increasing interest rates, making it more difficult to secure a feasible mortgage.
This has heaped further financial malady onto borrowers.
The chancellor's answer to this trend the advocation of longer-term mortgages; believing they can increase stability and the potential for purchase.
Specifically the chancellor would like to see greater flexibility in the mortgages market, with a greater number of ten, 15 and 25-year products on offer.
But this is a particularly wooly part of the Budget, with Alistair Darling proposing to consult with industry stakeholders with a view to a concrete policy at some point in the future - something that was already suggested in the pre-Budget report in October.
As a result the Budget again offers no immediate salve to the industry's concerns, and leaves buyers looking to remortgage in the coming months facing a great deal of uncertainty.
Twenty-five-year mortgages remain a niche product and are unlikely to become a mainstream solution to homeownership concerns.
One ray of light was shed by the extension of the shared ownership and equity schemes to key workers and first-time buyers.
These vulnerable groups will now be able to secure affordable property if they are able to meet 50 per cent of the cost of their home, with the government providing the rest.
Residents will then be able to purchase the property from the government, with no stamp duty payable until owners take control of 80 per cent of the property.
While this may bolster the chances of a small number of buyers of securing a property it still leaves those who do not qualify high and dry.
Buy-to-let investors will benefit from the 10 per cent entry level for capital gains tax (CGT) - however, those with larger portfolios will be forced to pay a rate of 18 per cent on gains over £1 million.
Ongoing concerns are also largely unaffected by the Budget.
The government has pledged to build three million new homes 2020, but this still appears to an unrealistic target with new home construction slowing rather than accelerating.
Drastic measures need to be taken to ensure this key element of the government's housing programme comes to fruition as, without an increase in supply, affordability in unlikely to increase in the long term.
The announcement of a further 70,000 affordable properties to be built on public land is a drop in the ocean and needs to be radically increased if the government is serious about meeting its own objectives.
Plans to ensure all these new build homes are carbon neutral is also proving tricky for the government to implement.
Today's pledge to ensure all new-build commercial property is carbon neutral by 2019 heaps more pressure on the government, but no real strategy yet exists to implement the changes.
Encouraging homeowners to cut emissions with insulation and smart metres may go some way to ensuring the UK meets its environmental commitments - but it is unlikely to provide the whole answer.
So, the budget will benefit a small number of first-time buyers and key workers able to secure a limited amount of affordable property, while the great majority of the market is left to face a slowdown in prices, tightening lending conditions and a long-term shortage of supply.
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- uk property features
