Press Cutting
Client:
CB Richard Ellis
Publication:
Whathouse.co.uk
Date:
23 March 2011
Budget 2011: Property Industry Reaction
Chancellor George Osborne unveiled his second Budget today vowing to fuel the UK economy ‘for growth'
by taxing oil companies £2bn. But he also pledged £250m to help 10,000 first-time homebuyers purchase
new build homes in England - a scheme which appears to replace Labour's HomeBuy Direct affordable
housing initiative. He has also confirmed stamp duty on homes costing £1m plus will rise from 4% to 5%.
But what does the housing industry think of today's announcements?
Robert Bartlett, Chesterton Humbert's CEO commented: "While the first time buyer initiative announced
today is welcome, the unemployment rate for this age is high and increasing. A general economic recovery
that boosts employment prospects will be the best tonic for this market sector. In the meantime, none of the
measures announced today address the general lack of mortgage finance which continues to blight the
market."
"The increase in stamp duty on April 6th from 4% to 5% will undoubtedly act as a further deterrent to
transacting properties above £1m and will impact most on higher rate taxpayers living in London and the
south east. Those who are trying to sell around the £1m mark will be under intense pressure to keep prices
under this figure, which will discourage them from selling, further limiting an already short supply of homes
in prime areas."
Richard Sexton, business development director of e.surv, said: "The help for first time buyers provides
some small relief, particularly for parents who are dipping into savings to help children fly the nest. First
time buyers are a fundamental part of the housing market and are largely absent at present, with their place
being taken by cash rich investors who can outcompete them for bottom end property. Unlocking this end of
the market will ultimately generate more transactions through the chain, provided that other budget
measures don't so severely curtail ability to buy that the effect is completely negated. Housing transactions
currently sit at around 550,000 per annum, less than 50% of the long term average.'
David Newnes, managing director of LSL property services, said: "The real problem for the majority of
first-time buyers is that lenders are feeling pessimistic about the economic future. This scheme will act as a
fig-leaf for that uncertainty, but little more. Back in 2007, only 48% of mortgages had an loan-to-value [LTV]
of under 70% of the purchase price. Now well over two thirds of mortgages are for less than 70% LTV.
Having to put up only 5% of the deposit on a newly built house will be great for those frustrated would-be
buyers who are able to leave the private rental sector, but it's unlikely to have a strong impact on rents or
property purchase prices across the UK.
"While commendable, this scheme is simply not big enough to bring relief to the majority of first-time
buyers."
Ian Fletcher, director of policy at the British Property Federation, said: "This package broadly makes
sense, because it targets home deposits, and is about as much as the government could realistically do in
current circumstances. It is important that any government spending at this juncture is also supporting
growth and jobs and we would like to have a seen a refined policy which targets such aid at homes yet to
built or completed, rather than a means of house builders selling unsold stock."
Housing expert Henry Pryor said: "I am not a fan of tinkering with markets and whilst laudable, first Time
Buyers are not a charity case, the market is just too rich for them. As with all markets that are left alone, it
will come back into balance but only when either more credit becomes available or when prices fall.
"Builders and developers have land to build upon, the costs of building [minus the land] is pretty much the
same as it was a decade ago it's just that they paid too much for the raw material and now want a leg up to
help them out of the mire. As Mervyn King said at the Mansion House last summer, "it's time to take away
the punch bowl" and whilst nobody likes to be told it is last orders, the very last thing the Chancellor should
be thinking of doing is opening another bottle!"
Simon Rubinsohn, RICS chief economist, commented: "Access to equity loans could help many people
who thought they were locked out of home ownership take their first step on the housing ladder.
"Opening up the housing market to first time buyers will be essential to help support economic growth. This
is a key area as the lack of mortgage lending has significantly reduced the number of homes being bought
and sold which in turn has led to low housing housebuilding levels. Although it would not be a solution to all
housing problems this could represent the first step towards a vibrant and sustainable property market and
assist the economy recovery."
"RICS welcomes steps to tackle under use of buildings but the wider impact on the commercial property
market also needs to be considered. As the economy grows there will be a need for additional
accommodation for expanding and new businesses and too many conversions to residential property could
mean that appropriate space is not available. Short sighted changes could lead to a lack of commercial
property, delaying the recovery.
"This situation could be made worse by the government's continued imposition of empty property rates
which are significant barrier to speculative commercial property development."
Mark Collins, head of residential, CBRE, said: "Large deposit requirements are a significant impediment
to first-time buyers and the government has taken an important step towards alleviating this problem by
introducing £250m of low-cost loans and extending the stamp duty holiday for homes under £250,000. We
estimate that at least one million potential first-time buyers have been squeezed out of the market over the
last five years, which has had significant repercussions for the housebuilding industry. Housebuilders have
had to rely heavily on the overseas market in the absence of first-time buyers.
"However, the lack of available mortgage finance remains the most significant challenge for the housing
market with first-time buyers disproportionally affected. Buyers who can raise deposits may still struggle to
obtain a mortgage as first-time buyers are still viewed as a risk by the cautious banks, so additional steps
need to taken to loosen credit constraints."
Philip Atkins, Executive Director, Planning, CBRE, said: "Whilst this may be appropriate for isolated
office units that are well located near existing residential areas or town centres, this will clearly not be
adopted where Council's are keen to retain office floor space to meet the particular business needs of the
locality. It is also still uncertain how local authorities will control the requirements of the dwelling mix and
affordable housing."
Mark Blackwell, managing director of xit2, said: "The move to help first time buyers is little more than a
gesture and certainly won't be market changing. The scheme does little to address the vast backlog of first
time buyers who are stuck in the rental market. There were £46bn of first time buyer loans in 2007 and just
£24bn in 2010 according to CML stats, while the CLG says the number of households is growing by
223,000 a year, so this barely begins to scratch the surface. And the Chancellor isn't committing an
astronomical amount of money by any means - it will be funded evenly by the DCLG and the house builder.
It's not even a new scheme, it's a direct replacement for Labour's Homebuyer Direct Scheme."
Ben Everest, partner at West End specialist estate agency, LDG, commented: "We welcome The
Chancellor's announcement that the default answer to planning applications will now be "yes". This,
together with Eric Pickles' announcement that the need to apply for planning permission to convert empty
offices or shops into residential homes is to be scrapped, should help to increase stock levels of residential
housing."
Peter Krelle, Spicerhaart land & new homes, commented: "Plans to allow developers to convert empty
commercial property into residential buildings, given current levels of new homes being created, is exactly
what the industry needs to kick-start an increase in the supply of housing specifically in city and town
centres.
"Not only will it act as a catalyst to generating more housing for first time buyers, key workers and those on
a limited budget, but it also gives commercial owners a convenient way to sell unwanted property, often in
secondary, non high street locations, that are no longer viable for business use, but are ideal for residential.
"While this measure will undoubtedly be welcomed by the industry, it does come at a price - costs of a
comprehensive conversion can be prohibitive when compared to the cost of a complete new build project.
Therefore, it is likely that many ‘main stream' house builders will shy away from this option simply down to
economics.
"If mainstream house builders are on-board in the ory but not in practice, then it may be a while before this
measure delivers the sorely-needed boost we are all hoping for. There also needs to be an option to
demolish and rebuild where appropriate."
James Moss, director at property buying agent Curzon Investment Property, said: "Cutting red tape
and fighting nimbyism with a default yes is excellent news as it will save firms thousands of pounds in
bureaucracy. But we need to do everything we can to ensure that localism doesn't undermine certainty, as
it is this that enables developers to build on the kind of scale they need to keep costs down."
On the stamp duty rise: "This will be a big boost to the private rented sector as it will enable pension funds
to buy homes in bulk without unfair spikes in stamp duty of 5% because it was previously charged on the
entire value of the portfolio, rather than on each home. So if a fund buys 100 homes at £100,000 each they
will pay minimum stamp duty, rather than 5% of the whole amount."
Ian Fletcher, director of policy at the British Property Federation, said: "This is impressive backing for
a long-standing BPF campaign to have stamp duty on residential portfolio trades reformed. It will provide an
important boost for the private rented sector and we hope will tip the balance in encouraging institutional
funds into building homes. Using the average price is fairer and a welcome measure of support for those in
need of rented housing."
Roger Southam, chief executive property management company Chainbow, commented: "The
government's £250m FirstBuy Direct scheme is a welcome announcement to help first time buyers and the
housing sector grow after many years of decline and stagnation. However, as we have seen with HomeBuy
Direct and the predecessor schemes many issues arise due to their practicality not being thoroughly
thought through... while the FirstBuy Direct scheme is great to boost the industry more detail should be
written into leases to protect the new homebuyers."
HBF Executive Chairman Stewart Baseley said: "We are pleased the government is listening to industry
concerns and has recognised the economic and social benefits of building more homes. With Firstbuy the
Government has stepped up with a policy that will help first time buyers, boost economic growth and
provide a vital shot in the arm for the housebuilding industry.
"The severity of the housing crisis dictates that work doesn't stop here. It is crucial that all today's
announcements are built on, regulation is reduced, land supply increased and the planning system
simplified. The Budget shows ministers are listening and serious about tackling our housing crisis. This is a
very positive start.
"The Chancellor's commitment to switch to a ‘presumption in favour of sustainable development' based
planning system, where the default answer is ‘yes', is also a positive statement of intent. If the Government
is to meet its commitment to increase housing supply, more permissioned land must be made available."
Vernon Pethard, managing director of newhomesforsale.co.uk, commented: "The government's
attempts to help first time buyers is a positive gesture but won't be enough to kick-start the market. The
initiative will do little to help the vast number of first time buyers struggling to get a foot on the housing
ladder, and will merely replace the Homebuyer Direct Scheme.
"Plans to cut red tape to make it easier for developers to convert unoccupied commercial premises into new
homes, is a long overdue positive move, which should help increase desperately needed housing supply in
this country. Housebuilding output must improve to create more new homes, jobs and help boost the
economy."
John Phillips, Financial Services Director at Kinleigh Folkard & Hayward, said: "The new scheme for
supplementing deposits of first time buyers is great news for the housing market. Many first time buyers
have been unable to save the larger deposits mortgage lenders now require. Therefore if buyers are
enabled to buy a newly built home with a supplemented 25% deposit, not only will a rather stagnant first
time buyer market start to move again, but the new homes industry should be rekindled as developers start
to increase their yield in line with demand. Of course there may be an earnings cap on the first time buyers
eligible for the scheme which will hinder more of London's first time buyers than anywhere else, due to few
affordable properties. This will particularly affect older first time buyers with young families who need a
property with two bedrooms or more."
Robin King, Director of Move with Us, commented: "At last the chancellor has woken up and listened to
thousands of families, nationwide, who are struggling to realiase their dreams and get onto the property
ladder. The more money that the government can encourage to be pumped into the property market the
better for all of us. Introducing the Firstbuy direct scheme is a step closer to reducing the first-time buyer
crisis and should ultimately help to stimulate the housing market.
"But the jury will be out on whether this new initiative from the Chancellor will be sufficient to really move
the market forward, bearing in mind it affects only one part of the market and these people will still need to
be assessed for loans. At the end of the day, lenders will still hold the keys to unlocking growth in the wider
market and we are disappointed that the Chancellor has not tackled lending practices.
"We're calling for a return of traditional-style bank manager interviews which focus on detailed risk
assessment of someone's ability to repay the loan, which will open up higher loan-to-value mortgage
products to those who are a good credit risk. There are many people in the marketplace who could be good
borrowers. Lenders should be able to support these borrowers."
Peter Williams, executive director of the Intermediary Mortgage Lenders Association, said: "Any
move to help first-time buyers onto the property ladder must be applauded as this is a sector that has been
particularly badly affected by the credit crunch and subsequent mortgage drought. However, the
Government must see First Buy as one of a number of mechanisms to help the mortgage and housing
market because it will have little impact in isolation. George Osborne estimates that this scheme will help
approximately 10,000 borrowers, but that would only equate to a 5% rise in the number of loans to first-time
buyers compared with 2010 numbers.
"We would like to see this scheme used hand-in-hand with other initiatives, such as a review of the Stamp
Duty threshold. First-time buyers already benefit from 0% Stamp Duty on properties up to a value of
£250,000, but the threshold for house movers should also be reviewed to encourage greater activity in this
segment of the market.
"We would also like the Government to properly address the funding issue in the mortgage market.
Although the Government has recognised the importance of the wholesale funding sector to the availability
of mortgage finance, we have seen little in the way of support for this market. IMLA believes the
Government can play an important role in supporting the securitisation markets, which will ultimately result
in wider availability of mortgages across the board."
Alan Waxman, CEO and founder of Landmass, comments: "Relaxing the planning laws will somewhat
ease the pressure on the high demand for residential property yet our experience is that the high demand
for quality and purpose-built residential housing, especially in areas such as Mayfair, Kensington, Chelsea
and Belgravia, where the strong population influx from the UK and abroad will continue to widen the gap
between supply and demand. The point of easing planning regulations for developing commercial
properties into private homes will only make a small impact, particularly as supply has not been able to
cater for demand for several decades.
"The pressure is not just concentrated in the first time buyers' market; homes which are designed and
developed to a high standard are being actively sought after by buyers right across the spectrum and there
simply aren't enough residential buildings to cater for the demand. To add to the problem, growing
instability around the world in recent years has seen London become widely positioned as a "safe" bolt hole
by investors."
Nick Vaughan, head of residential development & investment at Hamptons International, said:
"Today's announcement to support first-time buyers is a step in the right direction to bring stability and
growth back to the housing and, in particular, the development market. The changes will mean, subject to
conditions, that a first-time buyer can buy a new-build property at a significantly more affordable loan-tovalue rates rather than current rates which are currently pricing this type of purchaser out of the market.
"The devil will be in the detail however. If implemented correctly, the re-introduction of the first-time buyer
into the new build market, will further aid the recovery of this part of the market. The knock-on effect should
be the further reinvigoration of the development and house-building sector.
Marc Goldberg, head of sales at Hamptons International: commented: "With previously announced
changes such as increased taxation, 5% stamp duty for £1m+ homes and an increase in National
Insurance contributions all about to take hold, it is refreshing to hear some good news from the government
with their commitment to help first-time buyers.
"The £250m injection announced today will grow the number of potential purchasers in the lower levels of
the housing market, bringing more people onto the property ladder.
"A lack of mortgage finance, particularly impacting first-time buyers, has hampered the property market
since 2008. This measure should therefore provide some impetus for this sector of the market.
"Mortgage finance for the mainstream property market remains tight, which continues to adversely impact
the market as a whole. Any further government measures to encourage more lending from banks would be
welcomed."
Adam Challis, head of research at Hamptons International, commented: "The number of first-time
buyers fell to a record low in 2010 and this is largely a result of difficulty in qualifying for a mortgage. We
are therefore encouraged by this initiative which could help up to 10,000 first-time buyers. First-time buyers
are vital to a healthy residential market as they normally represent a significant part of the housing market,
but slumped only 17 percent of all loans in 2010.
"This programme is also targeted at new build properties, meaning that there will be additional benefits to
the house building sector. The number of house completions fell below 150,000 across the UK in 2010, 60
percent of the estimated need."
Dominic Agace, CEO of Winkworth, said: "First time buyers are unfortunately still struggling to get a
foothold on the property ladder as high levels of deposits continue to penalise them. The government's
£250m package to help 10,000 first-time buyers to purchase a new build home is a step in the right
direction, although it needs to be widened to all property types. Furthermore, the government needs to
concentrate on increased lending, rather than individual segments of the market. Until there are signs of
sustained economic recovery, the banks are likely to continue to squeeze this end of the market.
"The increase in stamp duty in the budget has been long heralded and is not a sufficient disincentive to
slow progress in this sector of the market. Where finance availability is a secondary concern, the markets
remain active. A steady increase in interest rates is likely to be absorbed by the prime markets which
continue to hold up very well and to outperform the broader UK market, with ongoing upwards price
pressure. We have noted a higher percentage of asking prices being achieved this year in central London
than in the first quarter of 2010."
Alan Robinson of Robinson Jackson estate agents commented: "George Osborne's gesture to
encourage first-time buyers into the housing market is just that - a gesture. Sure we have brand new homes
on our books and this new initiative will help the few who are interested in buying a new build but in our
eyes, today's measure doesn't go far enough.
"This initiative doesn't help the vast majority of first-time buyers who can't buy a new build or those vendors
out there with entry level re-sale flats and houses to sell - we all know that first-time buyers are essential in
getting property chains moving and that's what our industry needs.
"It's sad that Mr Osborne's failed to address the true issue for first-time buyers - more competitive and
affordable mortgages for all."
Mark Vaughan, managing director of Notting Hill Home Ownership, said: "This [first time buyers]
scheme is good news for those who can afford mortgage payments combined with the interest free loan
proposed in the Budget. It's initiatives like this that will help young buyers take their first step onto the
property ladder, and we are pleased to see that first-time buyers are finally among the Government's
priorities.
"However, the scheme is likely to reach only a few thousand would-be buyers out there, and affordability is
likely to remain an issue for many. It's important that buyers consider all possible options if they are to be
helped out of the rental market and that the Government does more to make them aware of these options .
Shared ownership, for example, has been designed specifically to ease the financial constraints met by first
time buyers. As you only buy a share of the property, the deposit is relative to that share and could start
from as little as £5,000, making it a much more affordable option for many.
"Very few people can afford to buy a property outright these days, so it's vital that first-time buyers are
aware of all possible options to finance their first home."
London property consultant Charles McDowell said: "The Chancellor has shown judicious balance by
off-setting a tax increase on non-doms with an exemption for those who use funds brought into the UK to
invest in British businesses. While there is much to review in detail, on first glance, the variety of measures
encouraging entrepreneurship announced today, along with those to be unveiled later this week,
demonstrate to the UK's financial and entrepreneurial sector that the UK is still the best place to base
themselves."