What House? Budget reaction from housing sector

Yesterday's Budget announcement has been met with a mixed response from the housing industry.

The government's decision to double the stamp duty threshold was leaked to the press yesterday morning - typical Labour spin - but they failed to mention that stamp duty on homes costing £1m+ would be rising to 5%.

Labour's move was rather shrewd, as the Tory party is unlikely to make a fuss about the new high rate stamp duty, in order to avoid being seen as the party for the rich.

The stamp duty change is great news for first time buyers, as it will save them up to £2,500, but it will have restrictive benefits for the wider economy.

The government has also extended the Support for Mortgage Interest scheme at the higher rate for another six months.

This means that homeowners struggling to repay high mortgage rates will continue to receive government support at a set rate of 6.08%. 

Here are just a few responses to the Budget from members of the housing industry:

Liam Bailey, head of residential research at Knight Frank, comments:

"The changes to Stamp Duty announced today amount to a tax on London - only 44% of property sales will slip under the new zero-rate band compared average of 74% in the rest of the country. In addition well over 60% of all £1m+ transactions affected by the new 5% rate take place in the capital.

"The removal of stamp duty for first-time buyers purchasing properties under £250,000 is a welcome move and will benefit the new-build market that has been particularly hard hit by the housing downturn. Even in London, 44% of the properties sold last year were below £250,000. In some parts of the UK virtually all the housing stock will now be free of stamp duty for first time buyers.

"At the other end of the scale, the decision to increase the rate of stamp duty on properties worth over £1m from 4% to 5% is less welcome, although not entirely unsurprising as there is great public pressure for the perceived rich to pay more tax.

"For the super-rich purchaser the increase will be little more than a minor irritation and we do not expect it to have any impact on the market for houses worth over £3m. For houses worth around £1m there will be pressure from buyers to pull back asking prices below the new threshold to avoid paying the extra stamp duty."

Lucian Cook, director of Savills residential research, says: 

"Whether or not this increase would be maintained in the event of a change in government is key. If the 5% rate becomes a permanent fixture, then the softening of prices in the prime markets that we had forecast for this year could be limited but, consequently, price growth in the following years could be suppressed.

"In reality, an extra 1% on the purchase price is not significant compared to recent price gains.  We saw prices rise by a further 3% in central London in the first quarter of this year according to our prime central London index (figure confirmed today) and that on the back of +4.6% in the final quarter of 2009.  However, it is the effect on sentiment that could distort the market.

"If it is introduced the proposes of an additional 1% on properties over £1m will be disproportionately felt in the high value areas of London and the South East where £1m sales are the most common, where the increased tax and diminished bonus prospects are being most keenly felt."

"And on the assistance to first time buyers: "Transaction levels in the housing market have been running at around 53% of the previous 30 year average in each of the last two years, which means the price growth of 2009 was that of a partially functioning market.  A more sustained house price recovery needs much higher transaction levels, the key to which will be deposit affordability and access to mortgage finance.

"The raising of the stamp duty threshold will be welcomed by prospective first time buyers, particularly if it makes their deposit go further.  But with first time buyers currently requiring a deposit equivalent to 100% of their annual income, the bank of mum and dad - or more often the lack of - is likely to continue to play a far bigger role than stamp duty initiatives in settling who gets onto the housing ladder."

Stamford Homes' regional sales and marketing director Peter Bond says:

"This is wonderful news for first time buyers, and as an industry we must welcome any move which enables people to gain a foothold on the housing ladder.

"Last year's announcement of a temporary Stamp Duty holiday did prompt something of a stability in the housing market.

"A renewed optimism will be wide-reaching. An anticipated increase in the sale of new homes will have a positive knock-on effect to employment opportunities - which is great news for the construction industry."

"Stamford Homes is currently building in Bedfordshire, Cambridgeshire, Lincolnshire, North East Lincolnshire, Northamptonshire and East Yorkshire, where the majority of the homes fall below the newly-announced stamp duty threshold."

Karelia Scott-Daniels, director of the Buyers Agents Manse & Garret Property Search, says:

"The increase in stamp duty for properties over £1m is a real blow for both buyers and sellers of property in this price range. It feels like another tax on London, and we were hoping for a more pragmatic budget. I don't think it will lead to a stampede to buy or sell at this point because the political situation is so uncertain and a Conservative government would mean a raft of changes within three months, although I note that Cameron hasn't said he will scrap the proposal.

"Assuming the tax rise is implemented, it is likely to concentrate the minds of those thinking about moving in the next 12 months but in an uncertain market, buyers will want to recoup as much as possible through negotiation so vendors will have to take a hit on price. Early next year vendors entering the market would be well-advised to adopt realistic prices from the beginning and with everyone keen to beat the April deadline, this may provide an artificial stimulus for property in the low millions. I don't think it will have any effect at all on property at the top of the market.

"The increase in the stamp duty threshold to £250,000 is a welcome gesture but first time buyers are mostly struggling with funding. The measures might persuade those with substantial deposits or access to the bank of Mum and Dad to enter the market but funding is the main issue for first-time buyers right now."

Jo Eccles, property expert and director of London property search company, Sourcing Property, comments:

"The increase in stamp duty limit to £250,000 won't have an impact on first time buyers in London in my opinion - they are struggling to raise the 25% cash deposit now required to purchase a property with a cheap mortgage rate, so access to mortgages and funding is what is required to really make a difference.

"On average, approximately 50% of our clients are looking to buy a property in the £1m and above price bracket.  We anticipate a sense of urgency for those looking to buy or sell in this price bracket between now and April 2011 when the stamp duty rise comes into force.  Thereafter, I don't think the increase to 5% will put buyers off, however, they may want to recoup this extra tax by incorporating it in to their negotiations, thus passing the tax onto the vendor."

Kevin Wilkes, Managing Director Of The Worldwide Property, says:

"We welcome the chancellor's decision to abolish stamp duty for first-time buyers on property purchases up to £250,000. This will help many people who are currently struggling to afford their first home thereby creating additional purchase activity at the lower end of the market. In time we will see a positive knock on effect throughout the entire market. Combined with the expectation of an easing in the lending markets, today's announcement will certainly help to bring stability back to the sector."