Summary and Analysis: The Autumn Budget 2017 for Landlords, Renters and First Time Buyers

22^nd November 2017: The chancellor, Phillip Hammond delivered the 2017 Autumn Budget speech today against a “backdrop of weaker growth, Brexit uncertainty and falling living standards.”

Current economic climate

It’s likely that the current economic climate, summarised below, created heightened expectations around the Autumn budget.

• The UK can no longer boast about being the fastest-growing G7 economy. According to the New Statesman, it is now the slowest. In fact, “Britain has endured the lowest growth and the highest inflation of the ten major EU economies.”
• After a short-lived break in 2015 and 2016, real pay has started to decline again, with wage growth failing to keep pace with inflation. According to the Guardian, “Inflation has risen from 0.5% in June 2016, to 3% in October. Wage growth has failed to keep pace, despite low unemployment, and was 2.2% in September.”
• Climbing the property ladder has become increasingly exclusive, especially for first time buyers. Savills concludes that in 2007, the average first time buyer deposit was £12,556, and in 2017, it is recorded to be £26,224. The BBC supports this, reporting that “High deposit demands from mortgage lenders to first-time buyers have prevented many people from buying a home.”

Property announcements speculated prior to the budget

Prior to the chancellor’s speech, there were multiple speculations around what we could expect to hear about. For landlords, renters and property investors, some of the speculations were as follows:

• Stamp duty cuts were speculated to be introduced for first time buyers.
• Potential “tax incentives for landlords who guarantee tenancies of at least 12 months or longer” were expected to be introduced.
• In October 2017, the government announced an additional £10 billion to support the scheme until 2021, and this statement was expected to be reinforced in the Autumn budget - despite controversial criticism which argues “all it has done is raise prices and hand profits to the big developers.”
• Speculations around how Hammond will balance “demands of landlords against priced-out generation rent” were discussed, especially in the aftermath of the buy to let landlord tax changes.

Summary of housing announcements made in the 2017 Autumn budget

• “Stamp duty abolished for first-time buyers for homes worth up to £300,000…And people buying a home worth up to £500,000 will not have to pay stamp duty on the first £300,000,” to help people in expensive markets like London.
• £44 billion announced for housing over the next five years. Hammond empathised with young people who “feel concerned about their prospects in the housing market, with house prices increasingly out of reach for many.” Homeownership amongst young people has dropped from 59% to 38%. “By the mid-2020s there should be 300,000 homes being built a year - the highest level since the 1970s.”
• £28 million for set aside for the West Midlands, Manchester and Liverpool to reduce rough sleeping by 50% by 2022, and eradicate it by 2027.
• Under a clampdown on empty homes, Hammond “announced plans to legislate for councils to be allowed to impose a 100% premium on properties left vacant.”
• Planning reform is required, with Hammond concluding there is too wide a gap in the number of granted planning permissions and the number of homes actually built. “In London alone there are 270,000.”
• 1 million homes announced to be built in the Cambridge-Milton Keynes-Oxford corridor.
• Under the logic that fixing the housing shortage requires more than just money, £34 million was set aside to develop construction skills across the UK.
• “£8bn of financial guarantees to support private housebuilding.”
• “£1.1bn for new urban regeneration.”

Preliminary analysis of housing announcements made in the 2017 Autumn budget

In ordering a review into the gap between the number of granted planning permissions and the number of homes built, Hammond attempts to clampdown on “landbanking,” yet critics have argued that instructing a review does not “rule out direct action.”

In regards to the Stamp Duty reform, Jonathon Haynes argued, “Stamp duty change: helps young people already wealthy enough to be thinking about house buying. And helps boost house prices which were in danger of falling. Great news, but not really for poor young people.”

Other criticism includes that the reform won’t help to increase supply, perhaps suggesting that long term control over house pricing is still out of reach. Nevertheless, the announcement is likely to headline for the days following the budget.

The clampdown on empty homes is likely to come as a relief to councils who requested the previous 50% cap to be increased.

Capital at risk