Philip Hammond had an unenviable job with his 2018 Budget. The uncertainty over the type, or even existence of a deal to leave the EU makes the job of forecasting and planning even more difficult than usual.
But he has had the timely boost of better-than-expected tax receipts and that’s given him some room for manoeuvre. And, in a real move away from recent years, he has chosen to commit to spending which, according to the official forecasts, bakes in a bigger government deficit ahead.
Many of the Chancellor’s rabbits were poached from his hat by the Prime Minister before the Budget with announcements for spending on the NHS and, importantly for the housing market, the removal of restrictions on Local Authority finances which have prevented them from building homes. That liberalisation has already been warmly welcomed and should help to boost the lacklustre levels of housebuilding of recent years, although only a little.
In another nod to the need for new homes and the plight of first time buyers, he offered some funds to give local authorities autonomy via neighbourhood planning systems to offer discounts to local buyers over outsiders. That won’t be a game changer for the housing market as a whole but will be very welcome in expensive communities where markets have been distorted by investors.
Mr Hammond also rectified an anomaly in the stamp duty exemption for first time buyers announced last year. That relief on property up to £500,000 will now be extended to buyers of shared ownership properties – and will be retrospective, too.
On top of this there wasn’t a huge amount specifically aimed at the housing market in the Budget. Interestingly and frustratingly for housebuilders there was no news on the future of Help to Buy which is due to finish in 2021. However, there was some money: £5.5 billion for the Housing Infrastructure fund to provide 650,000 new homes and on top of that the commitment to back £1billion bank guarantees for small and medium-sized housebuilders who have been slow to return to the market since the financial crash. And a by-product of attempts to revive and reinterpret high streets in England concessions for the change of use of underused retail and commercial premises into residential homes.
In wider economic terms, the increase in the tax-free personal allowance to £12,500 and the higher rate threshold to £50,000 will give a boost to household finances from next year. And this is on top of the expectation that wage growth will continue to outpace inflation and employment will remain strong. That is good news for the wider housing market but is unlikely to release the bottleneck among movers. The official housing market forecasts do expect both prices and activity to increase over the forecast period to 2023, although the pace of growth of both is still very modest.
Overall this budget isn’t a game changer for the housing market, but the commitment to spending to help support the economy as it goes towards Brexit will help to boost confidence at a time when wages and employment are strong, and confidence is essential for healthy housing markets.
Written by Fionnuala Earley, Head of Market Insights at MyHomeGroup Ltd