Chancellor Philip Hammond has announced extra funding for affordable homes in the Spring Statement 2019, while the OBR has revised down its expectations for house price growth.
Housing supply is on track to reach 300,000 new homes a year by the end of this parliament, according to the Chancellor - the highest level since 1970. This year, 220,000 additional homes will be built - the second highest level in 31 years.
The OBR's estimate for house price growth has been revised since the last measure before the Autumn Budget 2019. It now predicts house prices to collapse to negative growth by the end of 2019 before recovering to higher-than-previously-expected growth of 4% by 2021.
In the Autumn Budget last year, the Chancellor announced a series of measures, which he said today are already helping towards this new home target. This includes the abolition of stamp duty for most first-time buyers and the continued roll out of Help to Buy equity loans.
Today, he announced additional help to deliver this government pledge.
This includes an “Affordable Homes Guarantee Scheme” whereby the government will guarantee £3 billion of housing association borrowing to build 30,000 affordable homes.
He has also announced that £717 million from the Housing Infrastructure Fund will be used to ‘unlock’ up to 37,000 new homes at various sites, including Old Oak Common in London, the Oxford-Cambridge Arc and in Cheshire.
As much as £445 million from the fund will be used to unlock more than 22,000 homes in the Oxford-Cambridge Arc.
Meanwhile, £260 million will go towards the Borderlands Growth Deal, which on top of the £102 million announced recently for Carlisle from the Housing Infrastructure Fund means up to £362 million of funding in the Borderlands area.
Simon Gooderham, joint managing partner at property auctioneer Cheffins, says: “While no one expected this Spring Statement to bring with it a raft of changes for the UK property industry, announced measures for increased funding for affordable homes is welcomed. Any measures introduced in order to speed up housing delivery will be met with open arms as shortages of stock have reached unprecedented levels in parts of the UK.”
Patrick Gower, residential research associate at Knight Frank, also welcomes the £3 billion of increased funding for the Affordable Homes Guarantees Programme. He adds: “The funding is welcome, because the government must look to a diverse range of housing providers if its ambitious target of 300,000 additional homes every year is to be met.
“This means looking not just to the volume housebuilders, who provide a significant amount of the country’s housing supply already, but also to Affordable Housing providers and developers of alternative tenures, such as Build to Rent, student housing and senior living.”
However, other commentators express disappointment at the lack of movement on stamp duty.
Cheffins’ Gooderham says: “It is unfortunate that the Chancellor did not tackle the issue of stamp duty which has had Britain’s housing market in a stranglehold; a relaxation of the levy, or even a holiday from it, could have gone some way to kick-start the market, particularly among those looking to downsize.”
He adds: “In context, stamp duty receipts have fallen significantly in 2019, down approximately £100 million in comparison to January 2018, which highlights the lack of movement within the housing industry. Until certain factions of the market are incentivised to move house, rather than penalised for it, the enormous swathe of second-steppers and family movers will remain locked in to their current properties, which will do nothing for Mr Hammond’s stamp duty bill moving forwards.
He suggests that going forward, stamp duty should be “analysed and amended in line with the current economic conditions”, rather than treated as the government’s “golden goose”.
Iain McKenzie, chief executive of The Guild of Property Professionals agrees that incentives are required to kick-start the market. “What is needed are measures to improve consumer confidence, as the fundamental issue that is holding the housing market back is Brexit and poor sentiment as a result, particularly evident in London and the South East.
“Other areas around the UK have not been as affected and people who need to move are doing so successfully. Transactions levels have dropped year on year, but only very marginally so the perception of a ‘failing market’ is not quite reality when you look at the bigger picture.”
He adds: “If we leave the EU with a no-deal then some people may continue to delay moving as they wait and see what happens in the market. House prices and transactions could fall further in some areas, but not by much and the impact will only be short-lived as the current uncertainty begins to lift.”
This article was originally written by our sister publication Moneywise.