No news is good news: Property industry reacts to Spring Statement

With the current market already seeing record house prices, double-digit growth and demand going through the roof, the Chancellor wasn't expected to focus too much on housing in his Sping Statement. And he didn't.

Property Reporter
23rd March 2022
Rishi Sunak 662

There was a reduction in VAT on the installation of energy-saving materials in residential properties from 5% to zero for the next five years and £500m was put into the Household Support Fund.

Despite cries from the Labour benches of "Is that it?", it largely appeared that it was.

Martin Lewis tweeted: "If that's all he's doing on energy - it is limited and won't impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October.

"My head has sunk. I just hope there's a rabbit to come out of the hat."

However, no rabbit emerged. But could it be a case of no news is good news for housing?

As you would imagine, the property industry has been quick to react, despite the lack of news. Here's what they're saying:

John Phillips, national operations director at Just Mortgages. said: “As expected, there wasn’t anything directly related to the mortgage sector in the Spring Statement.

“The housing market has shown its resilience recently, and although the stamp duty holiday certainly kick-started a frenzy in the last few years, another SDLT break isn’t necessary to keep the market moving.

“It is encouraging that measures have been put in place to ease the cost-of-living crisis, and although the inflation and rising energy prices may impact some, there are still people looking to move to keep the market buoyant and brokers busy.

“As activity settles back to pre-pandemic levels, there is still a steady stream of buyers, and with the Monetary Policy Committee increasing base rate recently, advice from brokers will be even more critical than usual. Rates look set to continue rising and this may spark moves and remortgages as borrowers and brokers look to fix ahead of rates hitting their peak.”

Chris Druce, senior research analyst at Knight Frank, said: “Measures announced today in the spring statement, including a 5p reduction in fuel duty and increase in the National Insurance threshold, will soften the impact of the rising cost of living.

“However, pressure on personal finances will mount and with the cost of borrowing set to continue climbing to combat inflation, which is at a 30-year high of 6.2% and forecast to peak above 8% this year, we can expect to see house price growth and demand moderate.

“It means that with supply currently tight, demand strong and mortgage rates low, there is a clear window of opportunity open for buyers and sellers to act now.”

Stuart Law, CEO of the Assetz group, said: “With inflation hitting its highest level in decades today, it’s a stark reminder of the scale of the challenge we face in being able to protect people from the worst cost of living squeeze we have seen for a generation.

“While we, of course, welcome the Chancellor’s interventions to support households with the increasing cost of living, including decreasing fuel duty, removing VAT on measures to make homes more energy-efficient and increasing the National Insurance threshold later this year, the ONS announced this morning that house prices grew nearly 10% over the year to January 2022. With the Bank of England raising rates again to combat inflation, the cost of housing – by far people’s biggest monthly outgoing – is getting more expensive at the worst possible time.

“While we face an immediate crisis with the cost of energy, we also need to address longer-standing structural, economic and policy issues that are supporting ongoing house price growth. Price growth isn’t just about a knee-jerk response to the pandemic or lingering issues to do with post-Brexit trade, although of course, both continue to impact the market. How we want to live is fundamentally supporting high demand, while an onerous planning system, labour and materials shortages and high land prices continue to hamper construction output.

“We urgently need to see the content of the much-delayed Planning Bill to understand how this might unlock development by bringing down build costs, and as a result temper price growth to make housing more affordable for all. Ultimately, balancing supply and demand is the only sustainable way to ensure reasonable levels of house price growth and accessibility to housing for people of all incomes.

“We are determined to play our part in building a fairer housing market, which is why we’ve recently announced a major extension to our partnership with Aros Kapital to bring £1 billion of funding into the UK. Much of this will be targeted at supporting SME housebuilders. We need a market that better supports SME housebuilders and unlocks development, and as a result lowers the cost of housing, improving access to quality living accommodation for all, but especially those that need additional support; first time buyers, people on low incomes, people fleeing abuse, coping with addiction or living with mental or physical disabilities. We need a policy focus on these issues, as well as inflation and the cost of energy if we truly want to make a substantial impact in tackling the cost of living crisis.”

Timothy Douglas, head of policy and campaigns for Propertymark, commented: "We welcome today's announcement that VAT will be cut on the installation of energy-saving materials in residential properties. With rising energy costs as well as looming energy efficiency targets for the property sector, financial incentives are well needed. We will be scrutinising the details of this scheme as they are released to ensure they have the maximum impact for all homeowners, including investors in the private rented sector and that landlords and letting agents can take full advantage of the change.”

Marc von Grundherr, director of Benham and Reeves, commented: “The biggest personal tax cut in the last 25 years and an early election Budget for sure. With such headline-grabbing announcements, the lack of property focus will easily slip through the cracks. 

"That said, environmentally-minded homeowners will welcome today’s announcement that VAT on green additions to their homes will now be cut from the existing 5%. Of course, with inflation also being announced at 6% today, has this benefit already been negated? 

"While great for the planet, solar and hydro energy outlets can be expensive to implement and take some time before the return starts to outweigh this initial cost and so it remains to be seen how meaningful this move will actually be.”

Michael Bruce, CEO and Founder of Boomin, says: “A Budget with nothing much for housing but a little for the household itself and this was largely to be expected. 

"The stamp duty holiday introduced during the pandemic was probably the biggest bone the government has thrown homebuyers in recent times, so to expect another to come so soon after the final December deadline is certainly wishful thinking.

"Especially when house prices remain so buoyant as, after all, a high rate of house price growth is the government’s driving indicator of success and they’ll only stoke the fires when these flames are starting to fade.”

James Forrester, managing director of Barrows and Forrester, commented: “Such a bold move on income tax is of course welcome, but let’s not forget that this is somewhat diminished by an increase in both personal and employer national insurance, as well as the impending hike in corporation tax. 

"This will cause further problems for homeowners across the nation who will have seen a sharp increase in the cost of running their home already this year, with both an increase in interest rates, rising energy costs and a jump in fuel prices all bringing additional financial strain. 

"So while there have been no real property initiatives announced today other than 0% VAT on energy-saving initiatives, other announcements such as the cut in fuel duty and the increase to the household support fund will, at least, help reduce this overall cost of living. 

"This should provide some small amount of breathing room for those that are particularly hard-pressed at present, although it’s unlikely to solve the issue completely.”

Ross Counsell, director of Good Move, said: “Rishi Sunak this afternoon gave his Spring Statement and Cost of Living Announcement to the UK. Some key takeaways involved an income tax cut by 20p to 19p per pound and a VAT reduction from 5% to 0% on materials such as solar panels, heat pumps and installation to help homeowners install more energy-saving materials.

“This comes after the latest ONS House Price Index figures revealed that the annual rate of growth increased by +9.6% in January 2022, down from +10% in December 202. Along with greater tax relief, the announcement holds positive news for prospective buyers who may be in a more financially stable position to approach buying property.

“In regards to the VAT relief on energy-efficient materials, this is a great motivation for those who have the direct funds to put into these means. Not only will this be more financially beneficial in the long-term, but sustainable retrofits are also essential for future-proofing your home. However, for low-income households, it would have been more beneficial to offer a grant, as to pay the up-front cost of solar panels and heat pumps is simply not viable for some.

“Overall, the announcements bode positive news for those hoping to put more money into purchasing property and improving energy efficiency in the home. However, the tax reduction will only serve to benefit first-time buyers if additional schemes are brought in to help those buyers get a footing on the housing ladder.”

Geoff Garrett, director of Henry Dannell, commented: “Although there was generally no expectation that the property sector would feature in today’s Budget, some may have been hopeful of a breadcrumb or two from Mr Sunak in order to keep the market moving forward against what could be described as gathering financial headwinds. 

"We’ve now seen a string of consecutive increases to the base rate and this is not only going to impact the monthly payments of those homeowners on variable rate mortgages, but it’s also going to reduce the bullish approach to borrowing that we’ve seen from homebuyers in recent years. 

"The impact is likely to be a slowing in the rate of house price growth as buyers commit to lower borrowing amounts and sellers are forced to adjust their valuation expectations.”

Matthew Pratt, Redrow’s Group CEO, comments: “We welcome the Chancellor’s focus on boosting growth and supporting consumers with the rising cost of living. As the UK moves toward net-zero, it is positive to see tax breaks to help consumers install energy-efficient technology to reduce their bills and energy usage in the long term. As a responsible housebuilder, we are undertaking a range of research projects and pilots across our business and on our developments in order to build better, more sustainable communities for our homeowners and local stakeholders."

“While Redrow has a resilient business model, a healthy housing market is in everyone’s interests and improving consumer spending power will help to keep people moving and ensure appropriate housing is available for all purchasers.”

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