Even if you don’t directly hold stocks in UK housebuilders you might be exposed to these companies through your pensions or other investments; historically they’re decent dividend payers and income is attractive.

So, your ears might have perked up upon hearing the new chancellor pulled a cut to stamp duty out of his hat during his ‘mini-Budget’ along with all the other rabbits that have set markets abuzz. Stamp duty has long been perceived as a ‘bad tax’ a monetary boulder that often gets in the way of house market fluidity, making downsizing a particular issue because of the costs involved for those going the other way.

Under Kwarteng's new regime there would be no stamp duty on transactions under £250,000 with this threshold increased to £425,000 for first-time buyers. But is taking a chunk off the bottom of that boulder really the best way to solve the housing conundrum that has plagued the UK for decades?

HOUSEBUILDERS HAVE BEEN UNDER PRESSURE

It’s fair to say the sector’s been under the cosh for most of the year with share prices taking a massive hit. Rising raw material, energy and labour costs have squeezed margins, concern about the cost of living crisis has dented confidence that the housing market will keep simmering and cladding issues have lingered like bad smell, though in that case it does seem that a new chapter has finally been started.

So, it wasn’t surprising that speculation that the new chancellor was gearing up to make major changes to stamp duty prompted a flurry of renewed interest from investors. They only had to look back a matter of months to see the affect changes to this tax could have on the market with the former chancellor Rishi Sunak’s Covid holiday creating an incentive that house buyers were quick to grab hold of.

The excitement was short lived with the not so mini fiscal event sending shockwaves through markets and prompting expectations that the UK’s central bank would have to raise interest rates faster and further than had been anticipated.

With markets now pricing in the prospect of 6% rates by next spring increased mortgage costs are expected to negate any benefit to house buyer budgets or sentiment. Plus, with a shroud of opacity pulled down over rate expectations some mortgage lenders have pulled certain products off the shelves completely.

IS STAMP DUTY THE BEST WAY TO ADDRESS MARKET PROBLEMS?

But all that aside, is fiddling with stamp duty really the best way to fix Britain’s housing market? The temporary stamp duty holiday which created a stampede by buyers to close before it ended has been blamed for pushing up prices and it’s a trend which has continued into 2022. Over the 12 months to July the average UK house price jumped by 15.5% which the Office for National Statistics says is the biggest increase in 19 years.

When you consider you now have to shell out £292,000 for the average UK property that means would be buyers have to save a whopping £29,000 just on the deposit and that’s before having to fork out around £1,200 a month on mortgage payments many of the so called ‘generation rent’ feel the dream of homeownership is of the pipe variety. That feeling will have grown more acute with no sign of a replacement for the soon to be defunct Help to Buy scheme.

PLANNING PROGRESS

But there was a nugget in the mini-Budget that hasn’t garnered many headlines but could be the key that unlocks a rapid period of house building. Investment zones would enjoy streamlined planning rules, enhanced tax benefits and local authority support.

The Government says it’s in talks with 38 areas in England and plans to offer similar enticements Scotland, Wales and Northern Ireland. This is unlikely to create a ‘blank cheque’ for housebuilders to act unilaterally as councils will still have to answer to their constituents when polling day rolls around.

It is also not exactly a new idea but it could present a real opportunity for housebuilders and for the house buying public. Supply is the elephant in the room. Clearly housebuilders will be keeping a close eye on how demand is impacted by the current economic turmoil as building more means selling more. 

Average selling prices will be watched keenly, and developers will be hoping that by streamlining their processes they will be able to bring down costs.

The right homes in the right places at the right price is clearly the golden ticket and developers that can offer energy efficiency improvements will have an additional string to their bow.

‹ Previous2022-09-29Next ›