what the Spring Statement means for the housing market
The Chancellor delivered his Spring Statement to a backdrop of rising everything – energy bills, fuel prices, inflation, and interest rates. Such an unwelcome array of factors always meant that he would be limited in what he could do and the housing market, despite being such an important contributor to the wider UK economy, was largely left well alone.
Rishi Sunak did announce a change which ties in with the green agenda as well as targeting energy price rises, with the announcement that he was removing the 5 per cent VAT payable on the installation of energy-saving materials such as solar panels and heat pumps in residential properties. This will apply for the next five years. There will also be £500m for the Household Support Fund, doubling its total amount to £1 billion and supporting the most vulnerable families over the coming months.
missed opportunity on stamp duty
While the Chancellor decided to leave housing alone, he may have missed an opportunity in not reforming stamp duty. The stamp duty holiday proved to be a huge success, boosting the housing market and other industries connected to it during an unprecedented time.
While we are not calling for a return to the stamp duty holiday, some reform is essential. With such a lack of supply in both the sales and rental markets, purchase prices and rents are running away with themselves. One way to increase the supply of stock coming to market would be to revamp the stamp duty system. An initiative targeting downsizers in particular, encouraging them to sell, would help increase sales volumes and keep a lid on prices as there would be more balance between supply and demand.
The government also needs to do more to encourage further house building, providing the family homes which are so desperately needed. There’s such an excess volume of flats which have been built which are either unaffordable to the majority or do not provide the necessary space for a family. A need for outside space, with balconies, but more importantly communal gardens within these new developments, will encourage more family flat living, reducing the demand on houses.
With global concerns such as Covid and the situation in Ukraine having a direct impact on western economies, Mr Sunak needs to help curb the inflation rise and manage people’s costs. However, despite calls to defer the planned national insurance increase, he chose not to, raising the threshold instead. With inflation already hitting 6.2 per cent in February, a 30-year high, it’s only a matter of time before it increases to such a level, along with higher interest rates, that means people cannot afford their monthly outgoings.
Given how much has happened to the housing sector over the past few years, particularly the various stamp duty hikes and increase in tax and regulation for landlords, it is no surprise that many in the industry are breathing a huge sigh of relief that the Chancellor left well alone.
However, there was a missed opportunity to win back some loyalty the Government may well have lost over the past couple of years by helping businesses, the self-employed and all taxpayers.