Budget 2011: Property Industry Reaction

Chancellor George Osborne unveiled his second Budget vowing to fuel the UK economy 'for growth' by taxing oil companies £2bn. But he also pledged £250m to help 10,000 first-time homebuyers purchase new build homes in England - a scheme which appears to replace Labour's HomeBuy Direct affordable homes initiative. He has also confirmed stamp duty on homes costing £1m plus will rise from 4% to 5%, among other property measures. But what does the housing industry think of today's announcements?

Robert Bartlett, Chesterton Humbert's CEO, commented: "While the first time buyer initiative announced today is welcome, the unemployment rate for this age is high and increasing. A general economic recovery that boosts employment prospects will be the best tonic for this market sector. In the meantime, none of the measures announced today address the general lack of mortgage finance which continues to blight the market."

"The increase in stamp duty on April 6th from 4% to 5% will undoubtedly act as a further deterrent to transacting properties above £1m and will impact most on higher rate taxpayers living in London and the south east. Those who are trying to sell around the £1m mark will be under intense pressure to keep prices under this figure, which will discourage them from selling, further limiting an already short supply of homes in prime areas."

Dave Bexon of Property Price Advice said: "Any measures that attempt to stimulate the market should be welcomed and the Firstbuy scheme is a definite positive. The details of regional availability will be interesting to study as will the underwriting criteria, particularly if the market should show any signs of weakness... the government commitment at this stage is for one year only and to make a real difference in the medium to long term, a longer period of certainty would be beneficial.

"The government has also mooted radical changes to the planning system and this is of equal importance in creating a sustainable housing market. Housebuilders need to be able to build the right properties in the right places and in doing so will create many more jobs."

Bob Pannell, CML chief economist, commented: "Chancellor Osborne has adhered closely to the fiscal script set out in his first Budget. Today's indirect tax announcements will marginally soften the impact of significant fiscal cuts for household finances, but do not alter our forecast of a challenging year for households and the housing market this year."

Karl Hick, managing director of Larkfleet Homes commented on the budget: "The announcements from the Budget are certainly a step in the right direction for first-time buyers.

"As a housebuilder, Larkfleet Homes welcomes the news of the £250m FirstBuy shared equity scheme as it will help more first-time buyers gain that first crucial step on to the property ladder. The shared equity scheme also has the potential to increase housing delivery at a local level.

"However, Larkfleet would like to see a little more ‘joined up' thinking such as the FirstBuy scheme being used hand-in-hand with other initiatives."

Persimmon Group spokesperson said: "We are extremely pleased that the Chancellor has announced measures to help the country's aspiring first time buyers with the launch of the Firstbuy scheme - a joint initiative between the Government and new home developers.
"We recognise just how important first time buyers are in sustaining the property market and the prediction that the new Firstbuy shared equity scheme is expected to help 10,000 families get onto the property ladder is welcome news.

"The Firstbuy initiative follows on from the success of HomeBuy Direct, which was introduced in 2009, followed by Kickstart I and II. As a Group, we had the largest allocation at around 20 per cent of the available HomeBuy Direct sites, meaning we were able to offer more choice, were more accessible and could offer the widest range of new homes to our customers. To date, we are pleased to report that we have helped more than 2,000 buyers get onto the housing ladder using this very scheme.

"We will continue to offer schemes such as Kickstart II to help aspiring first time buyers take that all important step and commend the Government for taking decisive action today."

Eric Stoclet, CEO of Crown Mortgage Management said: "By continuing with the amended SMI, George Osborne has admitted times remain tough for borrowers. Although the number of repossessions has been falling since its 14 year peak in 2009, this has been largely thanks to ultra-low interest rates and the forbearance of lenders. Many borrowers who have benefitted from relatively low rates and assistance from the public sector since the recession remain worried about the prospects for the economy in the long-term. Although the MPC sounded defiantly doveish in their latest minutes, it's inevitable that high inflation will eventually bring about a rate rise. This, along with a potentially swift rise in unemployment resulting from public spending cuts will put greater pressure on household finances. During the coming months, the SMI will prove a vital tool in the effort to keep repossessions from trending upwards again."

David Salusbury, Chairman, National Landlords Association, said: "The National Landlords Association welcomes changes announced in the 2011 budget which will help reduce the barriers to investing in homes.

"The stamp duty concessions on bulk purchases will encourage landlords to invest more in residential property, thus providing much needed housing in the private rented sector.

"The NLA has campaigned hard for this change and is pleased that the government has listened to concerns about the disproportionate level of stamp duty paid by landlords seeking to expand their portfolios in response to increasing demand for affordable accommodation in the private-rented sector."

Richard Barber, partner, residential sales at W A Ellis, commented: "Whilst the Chancellor stated that non-domiciles are welcome in this country, increasing charges (to £50,000 for non-doms who have been in the country 12 years) may drive them away. Non-doms tend to take a 5-10 year view and are not afraid of moving, so it doesn't take much for them to be lured to attractive tax havens such as Geneva.

"The detail on how the Government plans to clamp down on stamp duty avoidance schemes remains to be seen, but I don't believe it is likely to have a major effect on the market. Whilst we have seen frantic activity within the Central London market with purchasers rushing to conclude sales prior to the 6th April increase, stamp duty mitigation schemes only account for a tiny percentage of the transactions within the residential property market and are always likely to exist in some form.

"Reforms to speed up the planning process are vital to stimulate the market, and will be welcomed by the housing industry."

Richard Sexton, business development director of e.surv, said: "The help for first time buyers provides some small relief, particularly for parents who are dipping into savings to help children fly the nest. First time buyers are a fundamental part of the housing market and are largely absent at present, with their place being taken by cash rich investors who can outcompete them for bottom end property. Unlocking this end of the market will ultimately generate more transactions through the chain, provided that other budget measures don't so severely curtail ability to buy that the effect is completely negated. Housing transactions currently sit at around 550,000 per annum, less than 50% of the long term average."

David Newnes, managing director of LSL property services, said: "The real problem for the majority of first-time buyers is that lenders are feeling pessimistic about the economic future. This scheme will act as a fig-leaf for that uncertainty, but little more. Back in 2007, only 48% of mortgages had an loan-to-value [LTV] of under 70% of the purchase price. Now well over two thirds of mortgages are for less than 70% LTV. Having to put up only 5% of the deposit on a newly built house will be great for those frustrated would-be buyers who are able to leave the private rental sector, but it's unlikely to have a strong impact on rents or property purchase prices across the UK.

"While commendable, this scheme is simply not big enough to bring relief to the majority of first-time buyers."

Ian Fletcher, director of policy at the British Property Federation, said: "This package broadly makes sense, because it targets home deposits, and is about as much as the government could realistically do in current circumstances. It is important that any government spending at this juncture is also supporting growth and jobs and we would like to have a seen a refined policy which targets such aid at homes yet to built or completed, rather than a means of house builders selling unsold stock."

Housing expert Henry Pryor said: "I am not a fan of tinkering with markets and whilst laudable, first Time Buyers are not a charity case, the market is just too rich for them. As with all markets that are left alone, it will come back into balance but only when either more credit becomes available or when prices fall.

"Builders and developers have land to build upon, the costs of building [minus the land] is pretty much the same as it was a decade ago it's just that they paid too much for the raw material and now want a leg up to help them out of the mire. As Mervyn King said at the Mansion House last summer, 'it's time to take away the punch bowl' and whilst nobody likes to be told it is last orders, the very last thing the Chancellor should be thinking of doing is opening another bottle!"

Simon Rubinsohn, RICS chief economist, commented: "Access to equity loans could help many people who thought they were locked out of home ownership take their first step on the housing ladder.

"Opening up the housing market to first time buyers will be essential to help support economic growth. This is a key area as the lack of mortgage lending has significantly reduced the number of homes being bought and sold which in turn has led to low housing housebuilding levels. Although it would not be a solution to all housing problems this could represent the first step towards a vibrant and sustainable property market and assist the economy recovery."

"RICS welcomes steps to tackle under use of buildings but the wider impact on the commercial property market also needs to be considered. As the economy grows there will be a need for additional accommodation for expanding and new businesses and too many conversions to residential property could mean that appropriate space is not available. Short sighted changes could lead to a lack of commercial property, delaying the recovery.

"This situation could be made worse by the government's continued imposition of empty property rates which are significant barrier to speculative commercial property development."

Mark Collins, head of residential, CBRE, said: "Large deposit requirements are a significant impediment to first-time buyers and the government has taken an important step towards alleviating this problem by introducing £250m of low-cost loans and extending the stamp duty holiday for homes under £250,000. We estimate that at least one million potential first-time buyers have been squeezed out of the market over the last five years, which has had significant repercussions for the housebuilding industry. Housebuilders have had to rely heavily on the overseas market in the absence of first-time buyers.

"However, the lack of available mortgage finance remains the most significant challenge for the housing market with first-time buyers disproportionally affected. Buyers who can raise deposits may still struggle to obtain a mortgage as first-time buyers are still viewed as a risk by the cautious banks, so additional steps need to taken to loosen credit constraints."

Philip Atkins, Executive Director, Planning, CBRE, said: "Whilst this may be appropriate for isolated office units that are well located near existing residential areas or town centres, this will clearly not be adopted where Council's are keen to retain office floor space to meet the particular business needs of the locality. It is also still uncertain how local authorities will control the requirements of the dwelling mix and affordable housing."

Mark Blackwell, managing director of xit2, said: "The move to help first time buyers is little more than a gesture and certainly won't be market changing. The scheme does little to address the vast backlog of first time buyers who are stuck in the rental market. There were £46bn of first time buyer loans in 2007 and just £24bn in 2010 according to CML stats, while the CLG says the number of households is growing by 223,000 a year, so this barely begins to scratch the surface. And the Chancellor isn't committing an astronomical amount of money by any means - it will be funded evenly by the DCLG and the house builder. It's not even a new scheme, it's a direct replacement for Labour's Homebuyer Direct Scheme."

Ben Everest, partner at West End specialist estate agency, LDG, commented: "We welcome The Chancellor's announcement that the default answer to planning applications will now be "yes". This, together with Eric Pickles' announcement that the need to apply for planning permission to convert empty offices or shops into residential homes is to be scrapped, should help to increase stock levels of residential housing."

Peter Krelle, Spicerhaart land & new homes, commented: "Plans to allow developers to convert empty commercial property into residential buildings, given current levels of new homes being created, is exactly what the industry needs to kick-start an increase in the supply of housing specifically in city and town centres.

"Not only will it act as a catalyst to generating more housing for first time buyers, key workers and those on a limited budget, but it also gives commercial owners a convenient way to sell unwanted property, often in secondary, non high street locations, that are no longer viable for business use, but are ideal for residential.

"While this measure will undoubtedly be welcomed by the industry, it does come at a price - costs of a comprehensive conversion can be prohibitive when compared to the cost of a complete new build project. Therefore, it is likely that many ‘main stream' house builders will shy away from this option simply down to economics.

"If mainstream house builders are on-board in the ory but not in practice, then it may be a while before this measure delivers the sorely-needed boost we are all hoping for. There also needs to be an option to demolish and rebuild where appropriate."

James Moss, director at property buying agent Curzon Investment Property, said: "Cutting red tape and fighting nimbyism with a default yes is excellent news as it will save firms thousands of pounds in bureaucracy. But we need to do everything we can to ensure that localism doesn't undermine certainty, as it is this that enables developers to build on the kind of scale they need to keep costs down."

On the stamp duty rise: "This will be a big boost to the private rented sector as it will enable pension funds to buy homes in bulk without unfair spikes in stamp duty of 5% because it was previously charged on the entire value of the portfolio, rather than on each home. So if a fund buys 100 homes at £100,000 each they will pay minimum stamp duty, rather than 5% of the whole amount."

Ian Fletcher, director of policy at the British Property Federation, said: "This is impressive backing for a long-standing BPF campaign to have stamp duty on residential portfolio trades reformed. It will provide an important boost for the private rented sector and we hope will tip the balance in encouraging institutional funds into building homes. Using the average price is fairer and a welcome measure of support for those in need of rented housing."

Roger Southam, chief executive property management company Chainbow, commented: "The government's £250m FirstBuy Direct scheme is a welcome announcement to help first time buyers and the housing sector grow after many years of decline and stagnation. However, as we have seen with HomeBuy Direct and the predecessor schemes many issues arise due to their practicality not being thoroughly thought through... while the FirstBuy Direct scheme is great to boost the industry more detail should be written into leases to protect the new homebuyers."

HBF Executive Chairman Stewart Baseley said: "We are pleased the government is listening to industry concerns and has recognised the economic and social benefits of building more homes. With Firstbuy the Government has stepped up with a policy that will help first time buyers, boost economic growth and provide a vital shot in the arm for the housebuilding industry.

"The severity of the housing crisis dictates that work doesn't stop here. It is crucial that all today's announcements are built on, regulation is reduced, land supply increased and the planning system simplified. The Budget shows ministers are listening and serious about tackling our housing crisis. This is a very positive start.

"The Chancellor's commitment to switch to a ‘presumption in favour of sustainable development' based planning system, where the default answer is ‘yes', is also a positive statement of intent. If the Government is to meet its commitment to increase housing supply, more permissioned land must be made available."

John Phillips, Financial Services Director at Kinleigh Folkard & Hayward, said: "The new scheme for supplementing deposits of first time buyers is great news for the housing market. Many first time buyers have been unable to save the larger deposits mortgage lenders now require. Therefore if buyers are enabled to buy a newly built home with a supplemented 25% deposit, not only will a rather stagnant first time buyer market start to move again, but the new homes industry should be rekindled as developers start to increase their yield in line with demand. Of course there may be an earnings cap on the first time buyers eligible for the scheme which will hinder more of London's first time buyers than anywhere else, due to few affordable properties. This will particularly affect older first time buyers with young families who need a property with two bedrooms or more."

Robin King, Director of Move with Us, commented: "At last the chancellor has woken up and listened to thousands of families, nationwide, who are struggling to realiase their dreams and get onto the property ladder. The more money that the government can encourage to be pumped into the property market the better for all of us. Introducing the Firstbuy direct scheme is a step closer to reducing the first-time buyer crisis and should ultimately help to stimulate the housing market.

"But the jury will be out on whether this new initiative from the Chancellor will be sufficient to really move the market forward, bearing in mind it affects only one part of the market and these people will still need to be assessed for loans. At the end of the day, lenders will still hold the keys to unlocking growth in the wider market and we are disappointed that the Chancellor has not tackled lending practices.

"We're calling for a return of traditional-style bank manager interviews which focus on detailed risk assessment of someone's ability to repay the loan, which will open up higher loan-to-value mortgage products to those who are a good credit risk. There are many people in the marketplace who could be good borrowers. Lenders should be able to support these borrowers."

Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: "Any move to help first-time buyers onto the property ladder must be applauded as this is a sector that has been particularly badly affected by the credit crunch and subsequent mortgage drought. However, the Government must see First Buy as one of a number of mechanisms to help the mortgage and housing market because it will have little impact in isolation. George Osborne estimates that this scheme will help approximately 10,000 borrowers, but that would only equate to a 5% rise in the number of loans to first-time buyers compared with 2010 numbers.

"We would like to see this scheme used hand-in-hand with other initiatives, such as a review of the Stamp Duty threshold. First-time buyers already benefit from 0% Stamp Duty on properties up to a value of £250,000, but the threshold for house movers should also be reviewed to encourage greater activity in this segment of the market.

"We would also like the Government to properly address the funding issue in the mortgage market. Although the Government has recognised the importance of the wholesale funding sector to the availability of mortgage finance, we have seen little in the way of support for this market. IMLA believes the Government can play an important role in supporting the securitisation markets, which will ultimately result in wider availability of mortgages across the board."

Alan Waxman, CEO and founder of Landmass, comments: "Relaxing the planning laws will somewhat ease the pressure on the high demand for residential property yet our experience is that the high demand for quality and purpose-built residential housing, especially in areas such as Mayfair, Kensington, Chelsea and Belgravia, where the strong population influx from the UK and abroad will continue to widen the gap between supply and demand. The point of easing planning regulations for developing commercial properties into private homes will only make a small impact, particularly as supply has not been able to cater for demand for several decades.

"The pressure is not just concentrated in the first time buyers' market; homes which are designed and developed to a high standard are being actively sought after by buyers right across the spectrum and there simply aren't enough residential buildings to cater for the demand. To add to the problem, growing instability around the world in recent years has seen London become widely positioned as a "safe" bolt hole by investors."

Marc Goldberg, head of sales at Hamptons International: commented: "With previously announced changes such as increased taxation, 5% stamp duty for £1m+ homes and an increase in National Insurance contributions all about to take hold, it is refreshing to hear some good news from the government with their commitment to help first-time buyers.

"The £250m injection announced today will grow the number of potential purchasers in the lower levels of the housing market, bringing more people onto the property ladder.

"A lack of mortgage finance, particularly impacting first-time buyers, has hampered the property market since 2008. This measure should therefore provide some impetus for this sector of the market.

"Mortgage finance for the mainstream property market remains tight, which continues to adversely impact the market as a whole. Any further government measures to encourage more lending from banks would be welcomed."

Adam Challis, head of research at Hamptons International, commented: "The number of first-time buyers fell to a record low in 2010 and this is largely a result of difficulty in qualifying for a mortgage. We are therefore encouraged by this initiative which could help up to 10,000 first-time buyers. First-time buyers are vital to a healthy residential market as they normally represent a significant part of the housing market, but slumped only 17 percent of all loans in 2010.

"This programme is also targeted at new build properties, meaning that there will be additional benefits to the house building sector. The number of house completions fell below 150,000 across the UK in 2010, 60 percent of the estimated need."

Dominic Agace, CEO of Winkworth, said: "First time buyers are unfortunately still struggling to get a foothold on the property ladder as high levels of deposits continue to penalise them. The government's £250m package to help 10,000 first-time buyers to purchase a new build home is a step in the right direction, although it needs to be widened to all property types. Furthermore, the government needs to concentrate on increased lending, rather than individual segments of the market. Until there are signs of sustained economic recovery, the banks are likely to continue to squeeze this end of the market.

"The increase in stamp duty in the budget has been long heralded and is not a sufficient disincentive to slow progress in this sector of the market. Where finance availability is a secondary concern, the markets remain active. A steady increase in interest rates is likely to be absorbed by the prime markets which continue to hold up very well and to outperform the broader UK market, with ongoing upwards price pressure. We have noted a higher percentage of asking prices being achieved this year in central London than in the first quarter of 2010."

Alan Robinson of Robinson Jackson estate agents commented: "George Osborne's gesture to encourage first-time buyers into the housing market is just that - a gesture. Sure we have brand new homes on our books and this new initiative will help the few who are interested in buying a new build but in our eyes, today's measure doesn't go far enough.

"This initiative doesn't help the vast majority of first-time buyers who can't buy a new build or those vendors out there with entry level re-sale flats and houses to sell - we all know that first-time buyers are essential in getting property chains moving and that's what our industry needs.

"It's sad that Mr Osborne's failed to address the true issue for first-time buyers - more competitive and affordable mortgages for all."

Mark Vaughan, managing director of Notting Hill Home Ownership, said: "This [first time buyers] scheme is good news for those who can afford mortgage payments combined with the interest free loan proposed in the Budget. It's initiatives like this that will help young buyers take their first step onto the property ladder, and we are pleased to see that first-time buyers are finally among the Government's priorities.

"However, the scheme is likely to reach only a few thousand would-be buyers out there, and affordability is likely to remain an issue for many. It's important that buyers consider all possible options if they are to be helped out of the rental market and that the Government does more to make them aware of these options . Shared ownership, for example, has been designed specifically to ease the financial constraints met by first time buyers. As you only buy a share of the property, the deposit is relative to that share and could start from as little as £5,000, making it a much more affordable option for many.

"Very few people can afford to buy a property outright these days, so it's vital that first-time buyers are aware of all possible options to finance their first home."

London property consultant Charles McDowell said: "The Chancellor has shown judicious balance by off-setting a tax increase on non-doms with an exemption for those who use funds brought into the UK to invest in British businesses. While there is much to review in detail, on first glance, the variety of measures encouraging entrepreneurship announced today, along with those to be unveiled later this week, demonstrate to the UK's financial and entrepreneurial sector that the UK is still the best place to base themselves."

Trevor Abrahmsohn, managing director, Glentree International, said: "First time buyers are getting a double whammy worth of benefit in today's 2011 Spring Budget.

"Firstly, the Government assisted deposit for the needy of 20% will fill the gap that has been so absent amongst this sector of the market which each year, as the market relentlessly rises, is disadvantaged. Given that house prices over time usually move only in one direction it may not be such a bad deal for the Government either as the acid value rises and fixed loans remain static.

"The two year holiday on stamp duty will also be very welcome, at the lower end of the scale, since in this sector every penny counts and to save the 1% can make a noticeable difference to the affordability."

Chris Spedding, relationship director for House Building and Building Materials at the Major Corporates division of Lloyds Bank, said: "The First Buy initiative will be welcomed by the house building sector and the broader UK construction industry as first time buyers are critical to the flow of business into these sectors and, to a large extent, these buyers have been frozen out of the market since 2008. However, this latest initiative must be viewed in context as this scheme will only partially fill the gap left by previous shared equity schemes which have now run their course, such as Homebuy Direct. The First Buy scheme is definitely a big sign of an increased level of support for the house building sector from the coalition government, and it is indicative of how housing appears to have moved up the government agenda over the last 12 months. This is good news for the sector, but it remains a relatively temporary fix and the industry may well be looking for something more substantial from the government over the next couple of years to help bolster growth."

Clare Hartnell, Global Head of Property at Grant Thornton said: "It is good news that the Chancellor has taken on board comments from the industry and listened to their concerns. The Budget is a step in the right direction but there is still more needed. Easing the process for planning permissions can only be welcomed and the relaxation of certain elements of the Real Estate Investment Trusts (REIT) regime will be good news, not only for existing REITs, but also for those considering a REIT as a vehicle for their businesses. But there were a couple of surprises. Listed in the reliefs to be removed at some point is the tax break for cleaning up contaminated land. It is also hoped that the Government reconsider the scope of capital allowances for the new Enterprise Zones.

Gareth Beer, chief executive of Newport Unlimited, the urban regeneration company, said: "As a key regeneration area, we want developers to come to Newport and we welcome measures that will encourage them by making the planning process easier to navigate. Proposals to make it easier to convert commercial premises to residential may well encourage developers to look at Newport and help to deliver new homes for the city. We also welcome the move to help first-time buyers. Combined help from the Government and housebuilders should help people in Newport to make that first vital step on to housing ladder."

Christopher Down, chief executive of Hearthstone Investments, said: "The anpremises to residential will be welcomed by the industry. A recent report by the Institute of Public nouncement of Firstbuy Direct, a scheme focussed on helping first-time buyers on incomes of less than £60,000 to buy new build homes, will certainly have positive impacts. On the one hand, it will boost demand at the crucial first rung of the housing ladder, whilst also encouraging house builders to continue developing starter homes.

"However, we feel that insufficient attention has been paid to rewarding first time buyers who do the right thing and save for a larger deposit over the long term.

"The government's planned consultation on making it easier to convert commercial Policy Research (IPPR) has indicated that the UK will be facing a housing shortage of 750,000 homes by 2025.

"By getting rid of the red tape surrounding the conversion of empty commercial property into housing at a time when housing completions have fallen to their lowest level in more than 50 years, the government would be demonstrating its desire to get to grips with one of the fundamental issues behind today's housing environment.

"This change to legislation alone could mean an increase in housing supply of up to 250,000 homes - reducing the UK's expected shortfall by one third in one fell swoop."

Have Your Say: What is your property view regarding today's Budget? Do you have a question for one of our experts? Email your comments to Marc Da Silva at marc@whathouse.co.uk