The housing industry is responding to Chancellor Kwasi Kwarteng’s mini-budget today (September 23rd). This post may be updated with more responses as they come in.
Commenting in response to the Chancellor’s announcement that Stamp Duty would be cut so that the exemption is raised to the first £250k (and £425k for first time buyers), Hinesh Chawda, MD of boutique property developer Life Less Ordinary, said:
“This cut to Stamp Duty will create more affordability in an environment where interest rates and inflation are both rising quickly. First time buyers, in particular, are facing the imminent end of the Help to Buy scheme without any replacement proposal, so this stamp duty cut will really assist them in making the move onto the property ladder.
“It doesn’t however address the fundamental issue of shortage of supply, which is inevitably increasing property prices, thereby making it harder for first time buyers to make the move into property.”
Jatin Ondhia, CEO, Shojin: ““The property market is undoubtedly integral to the UK economy, and its value extends far beyond SDLT tax receipts for the Government, given what it means for developers, investors, agents and service providers. Once again, as turbulence has struck, the Government has reacted quickly to support the market, just as they did with the Covid-19 stamp duty holiday.
“It will be interesting to see what impact this has from an investment perspective. For instance, we have seen retail investors deterred from buy-to-let purchases due to higher tax bills, but will this SDLT cut offer enough incentive to reverse that trend? I am not sure – the complexity and high cost of traditional property investment continues to alienate many, so we could see more people go down alternate routes, like fractional investing in real estate.”
Paresh Raja, CEO, Market Financial Solutions: “One of Whitehall’s worst kept secrets this week, the confirmation of the stamp duty cut, is nonetheless significant. Like Johnson and Sunak’s actions during the pandemic, today’s mini budget underlines the new-look Government’s determination to maintain a buoyant property market.
“But the true impact of this move remains to be seen. One common theme of the stamp duty holiday in 2020-21 was that sellers inflated asking prices to account for buyers’ stamp duty savings. Will we see the same again? It is likely, to an extent at least. But this time around we have rising interest rates impacting the amount buyers can borrow, so that will also shape the way that house prices move.
“I think more action should have been taken to incentivise developers, investors and homeowners to improve properties’ sustainability. Buyers and renters want greener homes, while the energy price crisis has demonstrated the need to improve how energy efficient buildings are. So, further financial incentives to encourage owners to lower the carbon footprint of their property would have made perfect sense at this time. We should expect this to be a recurring theme in the months to come.”
Jeremy Raj, National Head of Residential Property at Irwin Mitchell said: “These new measures will be greeted particularly warmly by buyers at the lower end of the market and by first time buyers, who will either benefit from a significant reduction in the amount of tax payable on transactions already in progress, or – as is the government’s aim – be encouraged to take that first step onto the housing ladder. It also appears to have been carefully constructed to ensure that the overall SDLT take of some £12 billion will not take too much of a hit, given the very high rates at the top of the market, which account for a large percentage of the total.
Matthew Pratt, Redrow’s CEO, said: “If we want a housing market that works for everyone, we need people to be able to move both up and down the ladder.
“In its current form, stamp duty eats into people’s deposits, impacting affordability and ultimately penalising those looking to relocate for work or wanting to downsize as part of retirement plans. Stamp duty needs to be reformed to help the housing market work more effectively and to stimulate more transactions, which will in itself drive tax generation throughout the home buying supply chain of estate agents, solicitors, removals, furnishings etc.
“Whilst we welcome today’s change, we would encourage the Government to consider further steps to reduce the stamp duty burden by reducing the tax bands across all levels, and introducing a lower, flat rate of tax for all homes.”
Regarding changes to the planning system and stamp duty relief on land purchases – Stuart Baillie, Head of Planning at Knight Frank, said: “Any attempt to remove red tape and speed up the planning process is welcome, however localised. Nearly a third of SME and volume housebuilders who responded to Knight Frank’s recent survey cited planning delays as the biggest challenge for the sector. Investment Zones with some form of deregulated planning restrictions are an interesting development. I can see this working for commercial development on business parks but how would it work in more complex urban areas with lots of constraints and a mix of uses? If the Government truly believes that relaxation or reform of planning rules is a lever to drive investment and growth it will need to properly commit to this, pushing through meaningful reforms prior to a General Election in 2024. As we have seen in recent years with an abandoned Planning White Paper and a slowly emerging LURB, taking the reforms from concept to legislation can be a long and drawn out process.”
Andy Sommerville, Director of Search Acumen, said: “Reforming Stamp Duty to increase the thresholds where tax applies looks like a tacit admission the housing affordability crisis isn’t going to improve any time soon. The Government seems to have concluded it’s easier to raise tax limits than reduce the gap between house prices and wages, given we’re nearing the point where the average home will soon cost the equivalent of ten people’s annual salaries.
“The reality is that positioning Stamp Duty changes as a tax-cut for hard-working people will land awkwardly on the desks of conveyancers who’ve barely had time to recover from the post-pandemic property boom brought on by the last reforms.
“That Stamp Duty ‘holiday’ was nothing of the sort for property professionals left struggling to turn the rusty wheels of the traditional homebuying processes. One year on, these latest reforms only scratch the surface of the modernisation and digital transformation needed to put the housing market on a stronger long-term footing.
“With virtually no warning, legal property firms will need to adjust once again to a new Stamp Duty regime without losing sight of the digitisation drive that’s underway across the market, with the AP1 transition deadline that’s fast approaching in November.”
Santhosh Gowda, Chairman of Strawberry Star, said: “The stamp duty cut offers a welcome stimulation to the housing industry, particularly in light of Help To Buy coming to an end, that will hopefully underpin economic growth and boost consumer confidence. It will encourage more people to move, including downsizers, which will free up family homes and allow first time buyers to get on the ladder. This will be a major fillip to the sector which faces cooling housing prices amid rising inflation and interest rates.
“By boosting growth of the residential sector, this will have a knock-on effect on the wider real estate sector and the economy in general.
“However, this is not a panacea. It does not change the fact that demand is still outstripping supply and it’s possible that house prices could prove increasingly volatile. Additionally, it does not address the more fundamental problem at the heart of the market which is the shortage of housing stock.”
