Budget 2009 - what does the property industry want from Darling?
Friday, 17 April 2009 1:35 PM
By Sarah Garrod
The Budget will be announced next Wednesday, and with the credit crunch and recession in full swing, all eyes are on Darling's red box.
But what will happen to the property market following the Chancellor's decisions?
The last year has taken its toll on the housing market, leaving it in somewhat of a fractious state. Houses prices are at the level they were three years ago according to recent Financial Times statistics, and although lending is on the up, the number of new mortgages being granted are still at a third of their average levels.
Wednesday's decision could therefore do much to impact the property sector, with the hopes of many in the industry waiting in earnest for those all important fiscal conclusions.
So what are the expectations from those working in the housing market?
Stamp Duty will no doubt be a key concern for many, especially given the government raised the level of the nil-rate stamp duty threshold at the last Budget, from £125,000 to £175,00.
This was a temporary measure at the time, but could be left as it stands in Wednesday's Budget.
The National Association of Estate Agents (NAEA) has said in a submission to Downing Street they want to see the Stamp Duty Land Tax, "abolished or reformed". Their colleagues at the Association of Residential Letting Agents (ARLA), echoed the concern.
Ian Potter, spokesperson for ARLA said: "Larger investor landlords can be put off buying blocks of property as Stamp Duty is based on the total value of the transaction, rather than value of individual properties within the block. This almost always has the effect of the duty being at the highest rate.
"Again, government incentives could be provided to purchasers of older property where a survey report and an Energy Performance Certificate (EPC) show a property is likely to benefit from investment.
"Where this is the case, and the landlord completes the work within a period of, 12 months from purchase, the stamp duty could be refundable. There could also be a 'clawback' facility whereby the government could claim back the refunded stamp duty if the property was not kept for a given period, say ten years, as a rental property."
The British Property Federation (BPF) has also condemned the way stamp duty charging is handled on bulk buying of residential property. They've said: "The position represents a structural disincentive against larger scale investment in residential property, which should in fact be encouraged, because it is more likely to be linked to more professional and efficient management and delivery of rented property in the residential sector.
"We would like to see bulk purchases of residential property taxed at the marginal rate applicable to each unit, levelling the playing field between individual purchasers and those seeking to make larger scale investments."
The Federation of Master Builders (FMB), have highlighted that the Stamp Duty threshold for home buyers does not reflect average home prices, and have therefore called for it to be increased to the price of an average home, at £205,000.
The Council of Mortgage Lenders (CML) have also asked for the threshold to be raised, to £250,000, and that the government scrap all higher stamp duty bands in the coming Budget. They say: "The introduction of higher rates of stamp duty and the failure to index thresholds in line with house price inflation over the years has significantly increased the amount of money the government raises from this tax.
"In the first ten years of Labour administration, revenue from stamp duty increased tenfold.
"The rapid growth in tax paid on house purchase reduces the ability of people in the workforce to move around in response to the needs of the economy. There is also a direct conflict between taxing first-time buyers through stamp duty and offering government help specifically targeted at them."
Nick Hopkinson, director of Property Portfolio Rescue (PPR), has asked for all three; help for 'bulk buyers', the £175,000 threshold held and revision of the tax as a whole. He says: "The current Stamp Duty system needs to undergo a radical modernisation. The Budget provides Mr Darling with the perfect opportunity to revise this tax, which is both unfair and outdated."
The dreaded Home Information Pack (Hip) will no doubt come under fire also.
The NAEA have called for it to be scrapped in the Budget, with doubts raised by a number of property specialists since they became compulsory at the beginning of this month.
Louise Cuming, head of mortgages at moneysupermarket.com said: "I fully endorse the call by the NAEA for a suspension to Hips. I would go further and ask for them to be abolished.
"There is just no proof that they are aiding the house buying process. However, there is plenty of evidence to the contrary. Buyers are just not interested in reading them and they are seen as an extra hurdle that is simply not needed by the beleaguered housing industry.
"The original aims of the pack was to ensure potential home owners knew what they were buying before they committed to going through the stress of getting the finance arranged. That objective was lost when the Home Condition Report was removed from the pack.
"Instead we are left with the legal documentation, which hold no interest for a potential buyer - and the Energy Efficiency Report - which confirms the obvious. If you are buying an eighteenth century cottage in need of care and attention, you are fully aware it is not energy efficient - but you want to buy it anyway!
"It is hard to find any justification for legislation that adds no value to either buyer (who is not interested) or seller (who faces expense and delay). I would say it is time for the government to admit the Home Information Packs have been a costly mistake and show true support for the housing market by shelving them in the forthcoming budget."
With repossessions on the up, concerns have been raised about tenants facing homelessness when their landlord is in arrears.
ARLA have called for greater protection of private sector tenants during the economic downturn, with Ian Potter saying: "ARLA calls on the government to ensure lenders give tenants at least two months notice of an eviction after a repossession order has been granted.
"This would rest the issue of blame with the landlord if the mortgage is defaulted provided that the tenant has kept up to date with their rental payments. It will also allow the tenant more time to find alternative accommodation."
However, the BPF have pointed to the plight of landlords, who they say face an increasingly difficult situation as their tenants are made redundant and cannot afford to make rental payments.
In a letter to Mr Darling, the BPF said: "Our members tell us that not all tenant demands for landlord concessions are reasonable when subjected to scrutiny. We have heard reports of unjustified delays in payments of rent by tenants, leading to cash flow problems for landlords who need to service their own debt and pay their own suppliers.
"Landlords are desperate to keep their property occupied and avoid having to bear security, maintenance and other costs (including empty rates) while a property is empty, and are having to seek new tenants who are only likely to be available in return for substantial incentives as well as reduced rents - with inevitable strain placed on landlords' existing financing arrangements and business models.
"In many cases, tenants are simply failing, or using administration to shed the weaker part of their business. In such cases, landlords may find themselves with empty property on their hands even though the relevant lease may have had many more years to run.
"This has particularly iniquitous implications on the business rates front."
The BPF's own campaign running up to the Budget has been to provide relief from the Empty Rates Tax
Deeming it the "tax on hardship", the BPF have said the full charging of such rates in the current economic situation is "hugely damaging".
They claim the "government should reverse the reform and consult stakeholders properly before reintroducing better targeted measures when the economy and the property sector recover.
"Alternatively, the government should use the power reserved in 2007 for relief to be reintroduced at 50 per cent - a power reserved to allow a flexible response to changing conditions in the property market. It is hard to imagine in what conditions parliament intended this power to be exercised if not the present."
The FMB has also highlighted a need to provide relief from the tax, saying it will help urban regeneration.
