Sigh of relief that Sunak avoids hurting housing market

The industry has reacted to the Spring Statement by breathing a sigh of relief that nothing was likely to cause damage to the housing market, beyond the general surge in the cost of living. 

The statement was dominated by announcements on energy efficiency, National Insurance thresholds and a surprise long-term income tax cut. 

This is what agents had to say in response: 

Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: ‘While we welcome fuel duty and tax cuts which help the majority, it is disappointing that there wasn’t greater recognition of the need to address the huge shortage of affordable housing. Property prices continue to rise, mainly due to lack of new supply, and more affordable housing to buy or rent would help bring more balance to the housing market. We would have liked to see some resolution of the cladding crisis, again helping release more properties onto the market, as owners who wish to move can finally sell up. These are so often the more affordable properties, particularly flats, which appeal to first-time buyers."

Michael Bruce, chief executive of Boomin, says: “The stamp duty holiday introduced during the pandemic was probably the biggest bone the government has thrown home buyers 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.”

Managing director of Barrows and Forrester, James Forrester, adds: “Such a bold move on income tax is of course welcome but 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.”

Vanessa Hale, head of residential research at Strutt & Parker: “With demand in the market continuing to outstrip supply, the ongoing shortage of stock will likely sustain further house price growth in the coming year, despite wider macroeconomic influences. That said, market activity and price growth could cool this year if these pressures continue to deepen. If the price of energy, materials and borrowing costs continue to rise, along with inflation, demand could soften and this will impact the pace of growth currently forecasted. As ever, the wallets of those yet to get onto the housing ladder will likely be hardest hit, driving increased pressure on the private rental sector.”

Dominic Agace, chief executive of Winkworth, says: "The Chancellor removing VAT on improvements to upgrade our housing stock and make them more energy efficient is a major boost for landlords and provide some relief against recent measure increasing the costs and reducing the viability of their investments. As we face increased rental costs due to sell-offs by landlords struggling in the face of increased regulation and taxation, this removal of VAT is vital to ensure we have sufficient supply of rental properties for young professionals needing to move to our cities for work, with rental costs they can afford to pay.” 

Timothy Douglas, head of policy and campaigns for Propertymark, comments: "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.” 

Stuart Law, chief executive of the Assetz group, states: “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.”

If you missed the statement itself, Chancellor Sunak’s main measures were:

- basic rate of income tax to be cut to 19% in 2024;

- National Insurance increased to go ahead but thresholds increased by £3,000, rising from £9,600 to £12,570;

- homeowners with energy-saving materials like solar panels, heat pumps or insulation will pay zero VAT for the next five years;

- doubling current £500m Household Support Fund giving additional assistance for the poorest facing escalating energy bills;

- fuel duty will be cut by 5p a litre from 6pm, runs until March 2023;

- £50m for further crackdown on fraud, including a new Public Sector Fraud Authority; 

- tax rates on business investment will be reduced - not now, but in the Autumn Budget in late 2022;

- there will be an overall ‘tax plan’ for the next five years, with three objectives - help households with the cost of living, create conditions for growth, and introduce tax cuts before the end of this Parliament;

- a forecast that the UK economy will grow by 3.8 this year (dramatically down from previous expectation of 6.0 per cent), with projections for growth of 1.8 per cent in 2023, and then 2.1 per cent, 1.8 per cent and 1.7 per cent in the following three years.