First, a confession. I attempted to write this article a day before the Budget, and while it felt adequate, it clearly couldn’t include details from the ‘Red Book’, and of course who could have predicted all the Government schemes announced by Jeremy Hunt which will undoubtedly give our sector a much-needed boost.
That was a joke, by the way, in case you think I’ve taken leave of my senses, or was hallucinating about a Budget speech that took place in another dimension.
Clearly, in terms of first-time buyers or indeed the wider housing and mortgage market community, there was very little to go on apart from some funding for housebuilding, the abolition of the furnished holiday let tax break and the multiple dwellings Stamp Duty relief, plus the drop in higher rate Capital Gains Tax (CGT) on the sale of residential properties.
If that seems slightly ‘small fry’ then you might well be right, especially as many in the sector were led to believe there would be specific new schemes for first-time buyers, action on stamp duty in a wider sense, and potentially a replacement for Help to Buy.
Some of the mood music around this Budget now focuses on the potential for another ‘fiscal event’ before the anticipated autumn General Election.
Whether that is likely perhaps depends on how the opinion polls move – or rather don’t – but as it stands I think it’s fair to assume this was the last Budget to be given by Jeremy Hunt, and the next one will be under a new Parliament and potentially a new Chancellor, regardless of who wins.
So, what does that leave us with? Well, certainly very little Government intervention, and certainly very little Government intervention on perhaps the number one issue facing the entire housing market right now, namely creating more supply to deal with ongoing and upward demand.
Which is somewhat odd, considering housing is likely to be a ‘key electoral battleground’, and Michael Gove was suggesting just a couple of months ago that the Government would be making some big ticket announcements designed to support more people onto the housing ladder.
There were, of course, no such announcements although the CGT cut is believed to be partly focused on incentivising landlords and additional homeowners to sell up, and it is hoped those properties will be bought by first-time buyers.
If that sounds vague, then of course it is, and given landlords are likely to have a long-term plan, one truly wonders just how much of an incentive a cut in CGT will have on them?
I’m not even sure landlords are put off from selling by CGT anyway; indeed, as we’ve seen recently, if the numbers no longer work for their investment property in a higher-rate environment, then there is a willingness to divest of these properties in order that they don’t make a loss. CGT doesn’t appear to have put them off.
The other point to make around this is whether first-time buyers truly want to buy rental properties. The Government might believe they do, and of course some existing tenants end up buying their rental home, but generally those properties once sold still exist within the PRS. In other words, it’s not really boosting the supply of properties available for first-timers to buy.
So what could, and perhaps should, have been done? A report from the BSA – due to be published in April – offers up a number of potential changes to be considered including a review of the regulation of affordability, plus allowing greater mortgage flexibility, and a review of the 15% cap on lending at 4.5-times income, which might all be utilised to make it easier for first-time buyers.
It cites affordability as being the biggest challenge to first-time buyers, but I would also suggest that saving for the deposit is just as important, not least for those who are dealing with the increased cost of renting, the increased cost of living, stagnant income levels, but are still harbouring dreams of buying a first property.
Many renters could quite comfortably afford the mortgage payments on a purchased home, but still struggle to get a deposit together, plus of course we continue to need more lenders and more products in the high LTV space, in order to allow them to buy a home with a smaller deposit, rather than having to find 10% or more.
It all makes for a challenging read of course, but as I’ve said many times before, as a sector we can’t simply rely on continuous Government intervention. Which you might well point out is fortunate given what we haven’t seen announced in either the Autumn Statement or the Budget.
Yes, there are elements of this way beyond are control, but we still have to focus on what we can do, what we can offer, and what may well shift the dial.
That means continuing to offer first-time buyer incentive schemes ourselves, as through Deposit Unlock, plus we can continue to push the envelope in terms of mortgage products and how they work with today’s wannabe first-time buyer.
I know it’s a difficult road to travel, but it’s one we do have to forge down, because the importance of getting new people to purchase can’t be underestimated.
This is a sector that needs new blood, and without any significant Government support, it will be up to us to find it and support it onto the ladder.
Patrick Bamford is head of international business development at Qualis Credit Risk, part of AmTrust International
