UK property industry responds to Osborne’s Autumn Statement

The Chancellor of the Exchequer George Osborne delivered the Autumn Statement to UK Parliament today. The plan is “focussed on reducing the deficit, restoring stability, rebalancing the economy and equipping the UK to compete in the global race”, says HM Treasury.

Speaking to the Parliament, Osborne said Britain is “on the right track” to cutting the deficit, but that the country would miss his original target for reducing debt. “Turning back now would be a disaster,” he added.

As a result, austerity measures have been extended to 2018, reports the BBC, while the UK economy is now forecast to shrink by 0.1 per cent this year.

Regarding housing, the British Property Federation has welcomed the announcement that from October next year all new build commercial property completed between then and September 2016 will be free from empty property rates for the first 18 months, up to the state aids limit, reports the Guardian.

Liz Peace, chief executive of the British Property Federation, commented:  This is a welcome first step towards mitigating the damage being wrought by empty property rates and we commend the Chancellor for taking heed of the powerful body of evidence that we and other industry groups submitted to MPs and to Treasury over the Summer.

“The government is rightly desperate to get Britain building again. Introducing a grace period for empty property rates for new development will remove a millstone from around neck of the property industry, and let it get on with what it does best – investing in our towns and cities, regenerating communities and building the offices, factories and shops in which we work. However, we urge ministers to look further at how this tax on business failure continues to act as a drag on economic growth.”

Osborne also announced that the lifetime pension allowance will be reduced to £1.25 million.

Camilla Wallace, partner at London law firm Wedlake Bell, commented:

“A further restriction on pension tax relief is likely to have an impact on first time buyers who are already struggling to get on the property ladder because of reduced lending and high property prices.  Aspiring second home owners, international investors and property developers have already crowded the market without the arrival of future pensioners driven into buy-to-let investments by unappealing conventional pension arrangements, looking for a safe haven for their “old age” funds.”

Osborne went on to say that there would be no “mansion tax” on wealthy properties because it would be “expensive” and intrusive” to introduce.

Sue Foxley, head of research at Cluttons, welcomed the news:

“It’s good news that there is no change to Stamp Duty or indeed the introduction of the much maligned ‘mansion tax’. However, the lack of political consensus in the coalition Government on this issue creates a question mark over future intentions. The UK benefits tremendously from investment as a result of the transparent and stable tax and regulatory structures. While investors and home buyers may breathe a sigh of relief now, a cloud could hang over the market if there is a possibility it will be revisited in six months’ time. The UK’s standing as an investment destination at a time when London remains one of the few markets perceived to have ‘safe haven’ status must be maintained.

“The £1bn loan and guarantee to extend the Northern Line tube to Battersea power station via Nine Elms will inevitably create new communities and bring more opportunities for investment, while infrastructure projects will support price growth over the longer term.”

Brian Murphy, head of lending at Mortgage Advice Bureau, added:

“George Osborne is to be applauded for including affordable housing among the Government’s priorities for spending when resources are so tightly constrained.  The pledge to support the construction of 120,000 new homes, bringing the annual total to 230,000, will go a long way to ease the pressure on the nation’s current housing stock.

“The Mortgage Advice Bureau’s National Mortgage Index shows that house prices have risen fastest in Greater London, the South West and Yorkshire and the Humber during 2012.  So in the interests of those who would otherwise be priced out of the property market, it is encouraging that these regions will gain over 34,000 new homes with affordable rent, with a further 4,200 empty homes being returned to use.”

But Richard Sexton, director of e.surv chartered surveyors, commented: “Raiding banks’ balance sheets smacks of hypocrisy. Lenders are being lambasted for not offering more affordable mortgages to borrowers, yet at the same time are being asked to hand over more money to the Treasury and set aside more in capital buffers. They are conflicting aims. And something has to give. It’s like asking a baker to produce make more cakes and then introducing a flour and egg tax.

“More has to be done to help the mortgage and housing market. The government should be doing more be help lenders lend, not increasing balance sheets taxes and fiddling around with small capital expenditure projects. Lending simply has to improve if the economy is to pick itself up off the ground. Net mortgage lending is just £6.1 billion so far this year: hardly the amounts needed to stoke the fire of the economy. Since the Lehman Brothers’ collapse four years ago, there has been just £38 billion of net lending. In the four years prior to the collapse there was £347 billion. Funding for Lending has helped, but it is counteracted by stringent capital adequacy requirements that leach away funds which could be earmarked for new lending. Banks aren’t yet confident enough to focus on first-time buyer lending. Less than 1 in 10 loans for house purchases this year have gone to borrowers with deposits of less than 15%, compared to 1 in 4 between 2005 and 2007.”

Article courtesy of The Move Channel

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