A Budget wishlist for the housing market

Updated: 
george osborneThere are no great expectations from the property industry that George Osborne is going to put housing at the top of his priority list in the Budget next Wednesday.

In fact it is likely that the launch of this week's major initiatives – the 'rebooted' Right to Buy and the NewBuy schemes, were timed to pre-empt a Budget that may be lacking in hand-outs to the mortgage and property markets.
But let's not be too hasty. More housebuilding, and an easing of planning laws, are desperately needed to help boost the market and help families up and down the country. Perhaps Osborne will oblige.

Of course, Chancellors talk the talk about building more homes in most Budgets, but real action and meaningful levels of funding are often found wanting.

But what else would really help boost the housing market?

Stamp Duty reform

Every year the property industry dutifully asks for a complete overhaul of the archaic Stamp Duty system. And every year it is ignored. It simply makes the Government too much money to mess around with. Of course we have seen temporary tweaks here and there, including the first-time buyer concession up to £250,000 – a welcome measure that will unfortunately end on the 24th March.


The Council of Mortgage Lenders states in its Budget submission that the £250,000 threshold should have been continued, saying:

"At a time of economic fragility, the loss of the stamp duty concession risks having a disproportionate negative effect on household sentiment, which we believe it would be best to avoid."

It has been long argued that we need to move from the cliff-edge slab system that produces bunching, particularly under the £250,000 tier, to a graduated system of tax (like income tax). It's not rocket science, but it is also not likely to happen any time soon, despite calls from various corners.

Closing Stamp Duty loopholes

What does look more likely is that Osborne will use the Budget to close the Stamp Duty loopholes that allow super-rich buyers to use complex avoidance schemes to reduce their tax liabilities. This is alleged to cost the UK £1bn a year in lost tax revenue and the Chancellor has admitted he is looking into the area.

However the British Property Federation has urged Osborne to tread lightly with any anti-tax-avoidance intervention, saying that any such changes should not be applied indiscriminately across UK property markets, particularly not the commercial property market.

Peter Cosmetatos, director of finance at the British Property Federation, explains: "Unlike high value housing, the commercial investment market is fragile, with weak confidence and limited liquidity outside central London.

"In its enthusiasm to clamp down on avoidance elsewhere, the Government must not forget the importance to the UK economy of rebuilding confidence and liquidity in the commercial property investment and development market."

Mansion tax

Vince Cable's vision of a mansion tax, where owners of properties worth more than £2m are charged 1% of their home's value, looks increasingly unlikely to be included in the Budget, partly because of the cost and complexity of administering the tax.

In addition, concerns that it would unfairly target income-poor, asset-rich homeowners in London mean the proposal looks like being shelved, at least for this Budget.

Mark Harris, chief executive of SPF Private Clients, said in his blog for mortgagesolutions.co.uk that the proposed mansion tax would be 'complex and inefficient', undermining London's position as a leading business location.

He claims: "Charging 1% of value of properties over £2m would yield £1bn, which is a drop in the ocean when you consider how much money the country owes. If this tax persuades the international wealthy that London is not an attractive place to live, it will mean a loss in tax revenue far greater than that raised."

Support for the Private Rented Sector

The Association of Residential Letting Agents, unsurprisingly, wants Osborne to use his Budget to help the Private Rented Sector.

It claims that the wider economy will be boosted by encouraging investment into the sector and removing barriers to growth that currently exist.

Ian Potter, operations manager at ARLA, said: "Demand for private rented housing continues to grow, with 3.4 million tenants living in the private rented sector - an increase of over one million tenants since 2005. The tax system can be used by the Government to incentivise investment in housing stock in the PRS, and therefore improve the conditions in which those 3.4 million tenants live."

Amongst other things ARLA has asked the Chancellor to introduce regulation of letting and sales agents, treat rented property as a business activity for Capital Gains Tax purposes, and build more homes to increase the supply of private homes for rent.

It's nicer with an ISA

Finally, the Building Societies Association is calling for an increase in the amount that savers can put into a Cash Isa to £10,680 a year.

It points out that not only will this help beleaguered savers in their bid to beat inflation, it will greatly assist first-time buyers to save up that all important deposit for their first home.

Here's hoping that next week George Osborne remembers just how crucial a healthy housing market is, not just to the wider economy, but to the lives of families up and down the UK.

Huffington Post Budget 2012

More stories

SPONSORED FINANCIAL CONTENT