Overall the Spring budget last week was rather lacklustre and surprisingly there was absolutely no mention of the housing sector. In particular, there was no statement of any changes to stamp duty, which many were hoping would be reduced to ease the burden for home buyers.
Some of the key points we noted were:
- The Office for Budget Responsibility (OBR) has revised up its growth forecast for 2017 from 1.4% to 2%, however it downgraded the outlook for 2018 to 1.6% before picking back up by 2021.
- Additionally, the OBR raised its forecast for inflation to 2.4% but this is expected to fall to 2.3% in 2018 and 2% in 2019. Arguably this suggests there is less pressure for the Monetary Policy Committee to raise interest rates to curb inflation, which is good news for home owners. However, the National Institute of Economic and Social Research expects inflation to be much higher at the end of this year.
- The most controversial change was the increase in the main rate of Class 4 National Insurance contributions for the self-employed, to 10% by April 2018 and 11% in April 2019. This announcement has caused some backlash with the government being accused of breaking their 2015 election manifesto pledge to not increase personal tax. Such was the backlash that there has already been a U-turn on this decision.
- Small business owners and investors will also be hit by the cut in the tax-free dividend allowance which will fall from £5,000 to £2,000.
- Whilst there was no mention of the housing sector, the Chancellor did announce transport spending of £90m for the north of England and £23m for the Midlands to address pinch points on the roads. An improvement in infrastructure should positively impact on the housebuilding industry.
- There was a focus on easing the burden of the increases in business rates with the announcement of a £300m discretionary relief fund for the worst hit, and a capping of business rate rises at £50 a month for those leaving small business rate relief. Additionally, pubs with a rateable value of less than £100,000 will receive a £1000 discount on their business rates. This is better news for local businesses and town centres.
Whilst the Spring budget didn’t mention housing, or make any changes to the heavy burden of stamp duty, the recently published White Paper did cover the government’s plans for housing.
This can be viewed here: https://www.gov.uk/government/collections/housing-white-paper