Following the Autumn Statement 2015, Simon Checkley, Managing Director of Private Finance comments on its implications:

 ‘One of the most welcome developments from this year’s Autumn Statement is the Chancellor’s decision to provide 400,000 new homes which will go a long way to address the UK’s urgent need for more affordable housing. The Chancellor has quite rightly made housing ‘a priority’ in this year’s Statement and by declaring his intention to provide a further £7bn for housebuilding, he has demonstrated a genuine commitment to addressing this issue at its core. The Government has declared its support of housebuilders in delivering these initiatives with additional funding as well as the extension of policies such as Help to Buy which will ensure that demand remains strong. Buyer demand will also be supported by underlying economic factors at play, such as the fact that GDP growth has been significant and stands among the strongest in the G7 since the last Statement. Unemployment is greatly reduced and wage growth is not only sustained but also looks set to rise further across the country in the foreseeable future. In addition to the building of new homes, supply will be further maintained by the fact that local councils will be incentivised by new powers to retain assets from the sale of residential property to spend on other vital public services. A combination of all of these factors paint a very sunny picture for the future of our housing market and mean that following today’s announcement, we can all look forward to enjoying a buoyant market that ensures supply finally keeps apace of ongoing and pent up demand.’

Other measures

Housing supply

The Chancellor’s plans to repurpose outdated and empty prison buildings into residential housing provide concrete evidence of his commitment to increase the supply of affordable homes and should be applauded. Repurposing buildings such as these as well as building new starter homes will mean pent up demand from would be homebuyers can now finally be met. With interest rates remaining low as we go into the New Year, the good news is that these new buyers can still benefit from a wide range of competitively priced mortgage products that will provide them with considerable cost savings when compared with the rent they would have paid in privately let accommodation.

‘London Help to Buy’ and shared ownership

The Chancellor’s further commitment to solving the housing crisis by reallocating commercial land for residential housebuilding and creating as many as 135,000 new shared ownership homes is excellent news for first time buyers and for the market as a whole. Mr Osborne has fortunately also adapted the Help to Buy scheme so it can be utilised in London where it is needed most. The ‘London Help to Buy’ scheme is a sign that the Chancellor has now listened to the advice of industry experts who have called for the scheme to be adapted on a region by region basis for some time. With the London version of the scheme requiring just a 5pc deposit up to the value of 40pc of the property we will really begin to see a significant impact on the local market which will liberate even more people out of rented accommodation where prices are at their highest.

Similarly, the Chancellor’s decision to offer a discount on shared ownership homes by as much as 20% to buyers over 40 is further evidence of his intention to adapt the scheme to where it is needed most. Older borrowers will now have even more support and even further incentive to refinance or buy their own homes before approaching their retirement years and furthermore, we are able to confirm that there are mortgage products out there that will support these purchases. There is a common misconception that older borrowers are unable to get a mortgage, however we have recently helped clients in their eighties and even their nineties. Therefore we hope that the adaption of this scheme plus further reassurance from us regarding the financial implications of these purchases will provide much needed encouragement to older borrowers.

Help to Buy ISA

The launch of the Help to Buy Isa, which supports would-be homebuyers by providing financial rewards for every contribution made, is due to launch just a week from now. This initiative, coupled with the Chancellor’s decision to convert disused prisons and relax planning laws will have an extremely positive effect at the bottom of the market and will help those buyers with a genuine motivation to get on the ladder realise their dreams of homeownership. We already know that several of the major providers have confirmed their involvement including Barclays, Lloyds Banking Group, Nationwide, NatWest, Santander and Virgin Money. Consequently, we are likely to see a healthy price war between lenders in the first few months after launch which may be exacerbated as some of the smaller lenders enter the market as the year goes on.

Stamp duty increase for Buy to Let

Clearly the Chancellor thinks that the 3% increase to be added to stamp duty can be accommodated within what he would anticipate as being the likely return on buy to let. If property market forecasts are accurate, then evidence suggests he might be right in thinking so. Whilst we recognise that this is clearly a negative outcome for the market, given how Buy to Let returns stack up, the figures show that this tax increase can be accommodated. It will require buy to let investors to find more cash but they would have had to do this in any case, particularly if the BofE were to cap Buy to Let borrowing which it is now increasingly unlikely do in the light of this new tax and the removal of higher rate relief. 

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