Chancellor George Osborne delivered a relatively downbeat Autumn Statement to the House of Commons last week, accompanied with lackluster growth forecasts and renewed fears of an impending credit downgrade in the new year.
The Office for Budget Responsibility revised down its UK growth forecast for 2012 from 0.8 per cent to a contraction of 0.1 per cent. Rating agency Fitch has already warned the UK is at risk of losing its AAA credit rating following the release of the OBR’s new figures.
Although 2012 has not been without its share of measures designed to try and stimulate a lagging housing market, the statement offered little to celebrate in terms of reviving a sector critical to the overall health of the economy.
The threat of a “mansion tax” has lingered as a possibility since it was again proposed by the Liberal Democrats in September. The party backed plans for a new annual property tax which would either be levied at up to 1.5 per cent of a property’s value or based on a site’s rental value, expanding on a manifesto pledge of a 1 per cent tax outlined in 2010.
By October, prime minister David Cameron had effectively ruled out any such tax, saying the Government has already put extra taxes in place for when people buy expensive properties but uncertainty persisted, contributing to a slowdown in the property market.
Enniss director Hugh Wade-Jones says: “The main problem was people not knowing where the goalposts were. This confirmation offers some kind of closure. We have seen a big drop in house sales over the last six to eight months on properties worth between the £2m and £5m mark as people hold off to see what happens.”
Equity Release Council director general Andrea Rozario says the absence of a mansion tax will help existing borrowers.
She says: “We were delighted to see the absence of a mansion tax in the statement, given the considerable wealth tied up in people’s property and how it might best be used to support them in later life.”
The announcement that newly built commercial property will become subject to an empty property tax exemption was also welcomed, on the basis that it might stimulate construction.
Subject to consultation, all newly built commercial property completed between 1 October 2013 and 30 September 2016 will be exempt from empty property rates for the first 18 months, up to the state aid limits.
British Property Federation chief executive Liz Pearce says: “The extension of the empty rates grace period for new builds from October 2013 is a good result and comes after months of hard work behind the scenes with MPs and the Treasury.”
Confederation of British Industry director-general John Cridland says: “Extending the exemption period for empty property rates on new commercial projects will boost confidence in the property market and encourage more construction activity.”
House building is seen as a major priority for many, with the Government failing to meet its own targets for new build homes.
The Home Builders Federation wrote a submission to the Autumn Statement in November, welcoming Government initiatives such as the expansion of FirstBuy, but emphasising that much more needs to be done in order to meet demand.
The submission says: “The measures to date have been most welcome but more needs to be done. Unfortunately private housing starts in England in the first half of 2012 fell 13 per cent, which suggests private completions are likely to fall in 2013.”
The chancellor reiterated the Government’s promise to deliver on 120,000 new homes, but there are concerns this will only solve one half of the problem.
Countrywide chief executive Grenville Turner says: “The shortage of housing is not the only issue as lack of supply coupled with lending issues is creating a perfect storm. We have been calling for some time now for the Government to set out a clear strategy for housing with the aim being to reduce volatility in the housing market.”
Chadney Bulgin mortgage partner Jonathan Clark says: “We all knew this statement was going to be more about cuts than spending but despite this, there was little cheer for the housing market.
“It would have been good to have seen another stamp duty holiday of some description and the promise to help fund a further 120,000 further homes was lacking in detail.”
John Charcol senior technical director Ray Boulger says the Government could have done more to explore its position as a guarantor to boost infrastructure investment, including housing.
Boulger says: “Bearing in mind the Government is guaranteeing NewBuy, there is a preference for schemes where they provide this guarantee rather than cash.
“It would be worthwhile having some serious consultation on whether there is a way for the Government to encourage pension funds, as the obvious source which comes to mind, to finance the construction of some of these long-term utility projects in exchange for a guarantee and a minimum return.”