How did the latest Budget affect the market?
The Chancellor of the Exchequer, Philip Hammond, extolled his latest budget to the nation in October, but how did his announcements affect the residential property market?
Encouragingly, his comments boded well: “The Government is determined to fix the broken housing market. Building more homes in the right places is critical to unlocking productivity growth and making houses more affordable.”
He went on to state that £500 million would be made available for the Housing Infrastructure Fund, to enable an additional 650,000 homes to be built. In addition, he envisaged an improved relationship with housing associations in England, worth additional funding of £653 million to enable another 13,000 homes to be built. He also announced the Government will underwrite guarantees for up to £1 billion, for smaller housebuilders to operate.
Diminished activity in the residential market
The estate agent Savills have reported that the majority of surveyors have seen declining numbers of new enquiries and vendor instructions. The optimism that these surveyors had seen in July and August, with August seeing the most new residential loan completions since 2007, has dissipated.
The Government’s Help to Buy equity loan scheme was cited as supporting around one in eight first-time buyer transactions in the first quarter of 2018. This scheme was extended in Mr Hammond’s Budget announcement, stating that it will now continue to be made available until 2023. However, it will be restricted to first-time buyers only, from 2021. There will also be regionally adjusted maximum property value caps applied to loans.
Summary of the Government’s economic statement
The Royal Institution of Chartered Surveyors (RICS) have reported a fall in sales transactions and a flat trend in buyer demand. In line with this, their 12-month sales expectations series is negative, mainly driven by decline in London.
Additionally, a recent report from the Bank of England highlighted a softening in the housing market, with fewer transactions and weaker price inflation in many areas. This report also revealed that the new-build market remained stronger than the secondary market.
Government figures for August 2018 showed that, on a seasonally adjusted basis, the number of residential property transactions with a value of £40,000 or greater, was 99,120. This is 2.6% lower compared with a year ago.
Between July and August 2018, total transactions increased by 1.3%.