Make building Britain great again

November 12, 2018

Apart from welcome big news items like bringing forwards higher personal tax thresholds and more help for the transition to Universal Credit for those on benefit payments, there is mixed news for UK property investors and owners.

Frustrated investor landlordThere’s a lot of frustration among landlords and property investors the punitive tax regime on buy-to-lets – namely Section 24* withdrawing tax relief on buy-to-let mortgage payments – has not been rolled back, like it has been in Ireland.
There are however, some other interesting developments.

Easier to convert commercial to residential property

There has been recognition in Sir Oliver Letwin’s Independent report -published alongside the Budget – that major house builders are not speculatively land-banking and holding up building rates (as some politicians and media pundits have claimed). Possibly prompting the Planning Reform Consultation, which is being launched on new permitted development rights, to allow upwards extensions on commercial buildings, or to be demolished and replaced with homes. Whilst welcome, and may enable value-for-money properties to be built in good central locations, will this be to the further detriment of UK High Street centres?

Help to Buy

The Help to Buy Equity Loan scheme is due to end March 2023. Whilst a long way off, that will affect First Time Buyers who have been helped onto the property ladder with this scheme, although a saving for tax-payers and possibly a potential dampener on home prices in the more modest price bands.

Housebuilders have been forewarned that they will no longer have a government-backed safety net and they will need to approach the market differently, scrutinising their locations and product offering more. Help-to-Buy supports about a third of housebuilders’ private sales – by March 2018 it had helped almost 170,000 home purchases; almost a fifth of the buyers were already homeowners.

Private Residence Relief (PRR ) is being diluted from April 2020. The occupation rules, which stood at 18-months has now been shortened to 9 months – meaning anyone who has lived in the buy-to-let property at some stage, which is being sold, can only add 9 months to the time they occupied the property, rather than 18 months to help reduce their Capital Gains Tax bill (CGT).

Lettings relief is worth £40,000 to each owner – doubling to £80,000 for a husband and wife. From April 2020, relief to be used to offset against CGT will only be available to a landlord who shares a home with a tenant.

Upside for First Time Buyers and Infrastructure

The Chancellor has extended the dispensation on stamp duty for first time buyers on properties up to £300,000 to first-time buyers of shared ownership properties valued at up to £500,000. That sounds good in theory, but I am not sure that retrospective payments are going to make a significant difference to many individuals or to the UK’s coffers….?

An additional £500m has been announced to unlock the Housing Infrastructure Fund, bringing the Fund to £5.5bn in total, for the Local Authorities to build infrastructure for housing developments to deliver the targeted construction of 650,000 homes in total. This is all good in theory but the Government and Local Authorities do not have a great track-record in bringing these targeted numbers of homes to fruition. Coupled with Theresa May’s commitment to lift a cap on Local Councils’ borrowing, against their existing housing stock, to build more homes, this bodes well for meeting local housing needs. Except it will take time to ramp up their capacity to build. Local authorities built fewer than 3,000 homes in the 2016-17 Financial Year.

It is encouraging to hear that there is a boost to 10 University Zones. For example up to 1m new homes in a region dubbed the Oxford-Cambridge Arc, two science and technology hubs-which will be serviced by an-already-announced 35-mile expressway between Oxford and Cambridge, via Bedford and Milton Keynes.

This was meant to be a holding budget, but has provided a boost to get Britain building again. It remains to be seen if these end up being unfulfilled ambitions….

*Section 24 of the of the Finance (no. 2) Act 2015 6th April 2017

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