The Autumn Statement 2016 and the Impact on Property
The Autumn Statement was delivered by Philip Hammond, Chancellor of the Exchequer on the 23 November 2016. The Statement focused on infrastructure and housing and there are a number of measures which will have a particular impact upon the area of property.
A few of the important points are considered below.
Ban on Upfront Fees imposed by Letting Agents
This measure is likely to have a major impact upon landlords and estate agents. Although the move has been welcomed by housing charities and campaigners who state that the fees distort the market and are unreasonable, letting agents and landlords have taken a different view.
The Charity, Citizens Advice, commented in a recent article in the Independent that the fees cost an average of £337 per person, although letting agents have said the figure is closer to £200.
In practice, many tenants are charged over £500 particularly, for properties in London. Fees can also be levied on sitting tenants who wish to remain in the property for another year.
A few agents have commented that it is a draconian measure and it will have an impact upon the rental market. Agents are also concerned that the banning of these fees will mean that the costs are passed onto the landlord who may well recoup the cost by charging higher rents.
This will of course, defeat the whole object of the measure as tenants will not benefit in the long term.
In a recent article contained in This is Money, Richard Price from the Association of Letting Agents feared that the ban on upfront fees was a ‘quick fix’ only.
He commented as follows:
“A ban on agents fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents”.
Despite the above, Stephen Smith, director of Legal & General Housing Partnerships has said:
“The implementation of this policy in Scotland in 2012 does not seem to have had a negative impact either way on rents or on the availability of private rented accommodation”
David Hollingworth, a mortgage broker of London & Country stated as follows:
“This will be warmly welcomed by tenants delighted that steep upfront fees are likely to be a thing of the past. Given the challenge of pulling together a deposit to buy a property, any reduction in cost for tenants can only help that cause”.
Landlords are however, feeling disconcerted about this along with the other measures which are working against Landlords such as the 3% Stamp Duty surcharge and the loss of tax relief on Buy to Let mortgages.
The general aim of the ban is to stimulate competition in the private rental market and provide clarity on tenant costs, however, only time will tell.
No Reversal of stamp duty charges for second homes or cuts on mortgage tax relief
There is a certain amount of disappointment amongst property professionals that no announcements were made in relation to stamp duty, despite wide spread calls for the tax to be altered which following Brexit, may have helped to stimulate the property market.
Some commentators were hoping that the Government would go some way to reverse the 3% surcharge on buy to let properties and people buying second homes, some also hoped that it would become a ‘sellers tax’ and called for a reduction on higher value properties where the market is slowing.
The Daily Telegraph also launched a campaign, demanding cuts for people who can afford to buy £1m houses, calling for this issue to be dealt with in the Autumn statement and labelling stamp duty has as a ‘punitive tax’, stating that it has resulted in a fall in house sales and a painful cut in income for removal firms and home renovators, indirectly resulting in the loss of 14,000 jobs.
The 19 November 2016 issue of the Guardian criticised this view, where it was stated:
“Philip Hammond had a choice, he could do a deal for the homebuyers of Mayfair, or do something for middle England instead”…
Jonathan Sealey, Chief Executive of bridging lender Hope Capital stated as follows:
“We all had high hopes that the Chancellor would tackle the one thing that many believe is killing the market; but disappointingly stamp duty was again conspicuous by its absence.”
There has been a decline in the purchase of investment properties since the stamp duty increases in April and the cutting of mortgage relief for rental properties.
Although this can be seen as a positive step for first-time buyers due to the reduction of competition, others argue that it lead to a short supply of rental properties on the market.
As Philip Hammond has announced that for the first time, there will be a ‘double budget’ in 2017, it will be interesting to see the extent of how stamp duty issues will be addressed moving forward.
Land Registry to remain in the Public Sector
This announcement has been made following the previous consultation on whether the Land Registry should be privatised which took place following the 2015 Autumn Statement and spending review.
The future aim is to allow the Land Registry to modernise and become a more digital data-driven registration business. Philip Hammond commented that, ‘Modernisation will maximise the value of HM Land Registry to the economy’.
The announcement has also been welcomed by the Conveyancing Association Chairman, Eddie Goldsmith, who commented in Mortgage Strategy as follows:
“We are fully supportive of moves towards an up to date digital conveyancing service as outlined in our recently published White Paper and modernising the home moving process. If we are able to see the Land Registry move swiftly in this direction then this ambition will be achieved much more quickly”.
This announcement appears to be a positive step and it will be interesting to see how the Land Registry now develops in the future.
Right to Buy
Following a pilot of Right to Buy with five different housing associations, L& Q, Riverside, Saffron and Thames Valley and Sovereign, the Government now intend to fund a large scale regional pilot of the Right to Buy for housing association tenants in 2017 to 2018.
Under the pilot, over 3,000 tenants will be able to buy their own home and benefit from Right to Buy discounts.
Critics have questioned the value of selling off precious housing stock and the Chartered Institute for Housing has found that even when housing associations are compensated, it would leave a funding gap of £3.3 billion.
The pilot is however, not the full scale roll out which was promised in the Conservative manifesto and former RICS Residential Chairman and North London estate agent, Jeremy Leaf commented in Mortgage Strategy as follows:
“It sounds to me as though the Government is kicking this into the long grass. It was a manifesto commitment to roll it out across the country but the Government is not going to do that now because it’s nervous about the cost.”
The other concern is that there could potentially be a supply issue as stock will not be replaced on a one for one basis as was originally indicated.
Although this is a positive step on one hand, it is expected that potential issues may arise.
The launch of a £2.3 billion housing infrastructure fund
The Government has announced that it will publish a Housing White Paper setting out a comprehensive package to reform the increase of housing supply and halt the declining housing affordability.
Philip Hammond has stated that £2.3 billion will be spent on infrastructure such as roads related to housing developments and the money would support the building of up to 100,000 new homes however, this proposal has been criticised by not providing concrete detail as to how and when this is going to be delivered and what material difference it will make to the availability of homes to enable prices to be kept in check.
£1.4 billion set aside for affordable homes
The Government has also announced an agreement to spend an extra £1.4 billion on affordable housing in England, however little detail has been provided at this stage as to how this will actually work, it has also been argued that the scheme does not go far enough because many more homes are needed and it is debatable as to the extent it will assist first time buyers trying to save for large deposits.
Local Authorities will be able to bid for the money under one of three existing schemes, Affordable Rent, Shared Ownership or Rent to Buy. It is estimated that this could lead to 40,000 more affordable homes being built.
The housing infrastructure fund will be funded by the NPIF (Northern Powerhouse Investment Fund) by 2020-21.
The Government will also invest £1.7 billion by 2020-21 through the NPIF in order to speed up house building on public sector land in England. This will be carried out through partnerships with private sector developers.
The Government has also confirmed that the Greater London Authority (GLA) will receive £3.15 billion to deliver 90,000 affordable homes by 2020-21.
Only time will tell as to the impact the above measures will have in relation to property and the housing market in general and it is certainly some way off before there will be a noticeable impact in relation to some of these measures.
For further information and assistance in relation to any property matters, please contact Amanda Hodgson.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
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