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Let’s hope millennials enjoy nano living. Much of the British government’s new plan to improve their chances of owning a home revolve around packing them into city centres at close quarters. Britain’s greenbelt (in reality, a patchwork of brown and green) will remain untouched. The biggest spending package in decades could change the housing market. But the largest UK housebuilders have found themselves circumvented.
Amid chancellor Philip Hammond’s dad jokes and habitual pledge to support regions outside London, Wednesday’s Budget included a blizzard of measures designed to address a perceived housing shortage. Unlike in previous years, few will help listed companies.
In theory, the decision to abolish stamp duty for first-time buyers paying up to £300,000 helps the entire industry. In reality its impact will be limited. Figures from the ONS show that the average price paid by first-time buyers in England is around £200,000. The £1,500 they will save in stamp duty is enough to buy a sofa, not put down a deposit. The tax reduction may in any case be incorporated into prices. The OBR estimates an additional 0.3 per cent rise in house prices next year as grotty flats and houses in England are suddenly repriced at £299,999.
The rest of the Budget should send a chill through large housebuilders. An explicit pledge to support SMEs means more competition for land, labour and materials. The era of 20 per cent-plus margins may be drawing to a close. After riding high on the Help to Buy scheme, shares in Barratt, Persimmon and Taylor Wimpey fell.
The Budget is not an industry catastrophe. The £44bn in loans and guarantees (in reality £15.3bn of new support) to ensure 300,000 new homes are built each year by the mid-2020s means more support for new builds. The focus on higher density dwellings and potential changes to planning permission should also be helpful.
More concerning is a pledge to curb land hoarding. Housebuilders with large volumes of land with planning permission include Persimmon and Taylor Wimpey. They will have a nervous wait until more details are published in the spring.
After years of unswerving support, housebuilders are gradually being shut out. Like many in the UK housing market, ministers increasingly feel they have not got their money’s worth.
The Lex team is interested in hearing more from readers. Will these measures achieve any more than previous pledges to increase housing supply? Please tell us what you think in the comments section below.