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Firm foundations for homes market

The Chancellor began this year&#39s Budget speech with a reminder that the backdrop to the housing market is healthy, with inflation and interest rates at their lowest levels for 35 years.

It was therefore unlikely he would do anything to jeopardise the confidence that exists.

The Chancellor duly desisted from increasing stamp duty and posted a largely neutral Budget for the property market in the main.

His commitment to a target inflation rate of 2.25 per cent this time next year and 2.5 per cent at the end of next year signals continuing stability in the interest rate environment, with scope for further possible reductions later this year.

The Chancellor did announce further moves to encourage the clean-up of contaminated land and a further initiative designed to bring additional properties to the market through a 5 per cent reduction in the VAT on homes renovated for occupation that have been left empty for at least three years.

He also announced capital allowances of 100 per cent for the renovation of property over commercial premises for the purposes of letting.

This does little for the mortgage market as this type of property has traditionally been harder to obtain a mortgage for. Therefore, such initiatives to encourage the use of this property for letting appear sensible.

The Chancellor&#39s most significant move in the area of housing was to announce a 100 per cent exemption on stamp duty for property transactions in disadvantaged areas (postcodes to be announced).

The idea is to encourage business and families to move into and help regenerate these areas.

However, while the initiative in itself is admirable, it may prove to be something of a double-edged sword for those already living there.

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