In light of the country’s advancement towards Brexit, the anticipated 2018 Autumn budget will reveal just how the Government is planning to manage the economy during this important political and economic transition. Set to be delivered on Monday, 29th October, this year’s budget takes on added significance as it marks the Government’s last major fiscal statement before the UK’s departure from the European Union in March 2019.
Yet, while this is an opportune moment for the Government to address the housing crisis and improve investment into the real estate market, it is possible that the Chancellor’s statement could fail to deliver reform that is clearly needed to increase housing supply and improve accessibility to housing for renters and buyers.
Much of this year’s political and economic discourse has been dominated by Brexit, and this has meant that many pressing challenges facing the property market have taken a back seat. This has been made more complicated by a flurry of high-profile cabinet resignations and the appointment of a new housing minister in July.
Regrettably, this means that imbalance between housing demand and supply persists, creating challenges for renters, prospective buyers, homeowners and seasoned investors.
What we know about the budget so far
Over the course of the party conference season, it became clear that the Government is refocusing its efforts on the housing market. At the Conservative Party Conference, Theresa May announced the Government’s intentions to reform Stamp Duty when it comes to foreign nationals and international companies purchasing UK real estate.
In a move aimed at tackling the housing crisis, this measure could see foreign investors face an increase in stamp duty of up to 3%. Unfortunately, this change does little to address the property shortage or the availability of affordable housing for first-time-buyers, and instead is likely to make UK property investment less appealing to overseas investors.
The Autumn Budget could also see landlords be given a tax break when selling properties to their long-term tenants. A cut in capital gains tax (CGT) could offer landlords an incentive to sell to their existing tenants, enabling people to buy the house or flat that they already live in and encouraging landlords to sell properties within their portfolio to new owners. Landlords currently face CGT of up to 28% on profits when they sell their property – a heavy burden for those looking to sell.
While these measures demonstrate that the Government is attempting to address housing crisis, much more needs to be done to improve supply, encourage investment, and ensure greater opportunities for those looking to jump on to – or move up – the property ladder.
The UK property market boasts some of the world’s leading real estate opportunities and remains a popular asset class amongst investors due to its offering of strong return in times of economic and political transition. International and domestic investment alike should be encouraged, incentivising people to participate in the property market.
A focus on housebuilding is also needed to ensure that the supply of housing meets growing demand. Looser planning regulations, finance for developers and investment into infrastructures are all promising solutions to improve the availability of affordable housing.
Meanwhile, improving the market’s knowledge of alternative finance options available to them is also required to support prospective homebuyers. According to recent research by Market Financial Solutions, nearly one in five (19%) UK property buyers have used a form of alternative finance to fund their property investment. Under half (46%), however, did not have enough knowledge or confidence in finance options other than mortgages to consider using them.
Another recent survey by Market Financial Solutions revealed the nation’s most desired property-related reforms. By far the most coveted reform was the introduction of new laws to prevent gazumping – a measure supported by 55% of Britons.
As the last major fiscal statement before Brexit, it will be interesting to see what proposals will be revealed in the Chancellor’s speech in addressing the challenges facing the UK’s real estate sector. This is a timely opportunity to announce new reforms that improve people’s ability to access property, while at the same time, encouraging more investment and introducing creative new measures to increase the housing supply.
Paresh Raja, CEO of Market Financial Solutions