Last year’s Autumn Budget has come under fresh criticism as a Treasury select committee warns the measures do not go far enough to tackle UK housing issues – and could even make it worse.
In November, Chancellor Philip Hammond addressed the serious issue of the UK housing shortage, and brought in some major changes, including abolishing stamp duty for first-time buyers on properties below £300,000 (or on the first £300,000 on properties below £500,000 in London), as well as setting a target of building 300,000 new homes each year for five years.
He also agreed to increase the cap on council borrowing to £1bn in certain areas across the country in order to fund the construction of new houses.
However, a cross-party committee of MPs has criticised Hammond’s budget, warning that the measures will not work unless the government takes further action. It has called for the borrowing cap to be lifted altogether for councils to be able to build more new homes, and has said it is not clear which areas are able to bid for the higher £1bn cap.
Conservative MP Nicky Morgan, who chairs the Treasury committee, said: “The chancellor pledged to fix the broken housing market, but the government is going to find it very difficult to meet this ambition. The increase in the cap on borrowing for local authorities to build homes is a step in the right direction, but it doesn’t go far enough.
“The borrowing cap restricts the number of homes that local authorities could deliver. To achieve the government target of 300,000 new homes per year, the cap should be abolished. The potential of local authorities to build should be unleashed.”
The real effect of stamp duty
On the topic of stamp duty, the committee believes that the current reform for first-time buyers will just push house prices up even further unless measures are taken to prevent this, meaning people could be paying more for their first homes than the amount they are saving by the tax cut.
According to research by Rightmove, houses that are typically targeted by first-time buyers – two-bedroom and smaller properties – saw the biggest increase in property prices in the month to January, with a surge of 1.1%. The small property market saw asking prices go up by an average £2,098, bringing homes in this bracket to an average cost of £188,024.
However, some surveyors have only predicted marginal house price increases over the coming months as a result of the stamp duty changes.
Simon Rubinsohn, Rics chief economist, said: “The initial feedback from the market doesn’t suggest that the stamp duty regime announced in the budget is going to have a material impact on activity. Indeed, the risk was always that a good portion of the benefit would be capitalised in the price, therefore limiting the benefit for the first-time buyer.”
The government has also agreed to boost the development of affordable homes to help more people onto the property ladder.